It’s been two decades since the Michigan Gaming Control Board started issuing licenses to casinos in the state’s most populous city. The state government is now touting Detroit casinos‘ School Aid Fund contribution.
According to a release from Lansing, the casinos have produced $2.2 billion for the School Aid Fund over 20 years.
Detroit casinos’ School Aid Fund backing in context
While that number is quite significant, there’s some context to understand. The state does not tax Detroit casinos on their gross revenue. The 8.1% rate is levied on their net win instead.
The difference is that the casinos are able to deduct what they pay out in patron winnings from the gross revenue prior to paying taxes. It’s similar to how many people have retirement contributions taken out of their paychecks pre-tax.
The MGCB’s monthly revenue report doesn’t show gross revenue figures for the Detroit casinos, only adjusted revenues. That’s the relevant number for tax purposes.
If the state taxed casinos on gross revenue versus net win, that $2.2 billion number could be higher. Paying over 8% of all revenue would make Detroit casinos much less profitable, however.
It isn’t as though Lansing is exactly hurting for cash, either.
Michigan just gave out a historic tax break
The state just finalized a deal to authorize the largest tax subsidy in Michigan history. Cleveland Cavaliers owner Dan Gilbert will receive $618 million in tax breaks for Detroit renovation projects.
That figure is more than a quarter of the Detroit casinos’ 20-year School Aid Fund contribution. At the current rate, it would take Detroit casinos almost six years to contribute funds toward the School Aid Fund equal to the amount Gilbert won’t pay in taxes on his renovations.
While the two matters are unrelated, it’s a good indicator of the economic scale the state deals in. A figure of $2.2 billion sounds grand to the average person, but it’s not as spectacular in the state budget.
This figure is also important because it gives context to concerns about education funding in expanding gambling in the Wolverine State.
The battle over School Aid funding in expanding gambling
Education funding from potential Michigan online casino games and legal sports betting is a hot-button issue. So far, that issue has held up legislation on those topics.
The state’s School Aid Fund also receives backing from the Michigan Lottery, and that’s what Gov. Gretchen Whitmer is concerned about. Whitmer fears gambling expansion could take dollars away from the School Aid Fund.
Rep. Brandt Iden, who is one of the legislators behind the gambling expansion bills, has stated he is willing to compromise on the tax structure. That could address Whitmer’s concerns.
Whether Iden and Whitmer will eventually seal a deal remains to be seen. What’s certain is that over the past two decades, Detroit casinos have contributed over $2 billion to schools across the state.
In the state’s budget and in the casinos’ books, that number isn’t gigantic over the course of two decades. In the budgets of the individual schools across the Wolverine State, every dollar from the School Aid Fund is crucial.