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Michigan Gov. Gretchen Whitmer proposed a tax increase on Michigan online casinos and Michigan sportsbooks for the fiscal year 2026/2027 budget, which begins in July.
Currently, iGaming operators that produce less than $4 million in revenue a month pay a 20% tax and those that generate more than $12 million are subject to a 28% tax.
There has been talks about tax hikes in recent years, however, nothing has materialized through legislation. Whitmer appears poised to make a change, in the hopes of generating more revenue.
Tax hikes meant to increase revenue for state
Michigan’s tax on iGaming is relatively friendly, with big operators paying a 28% tax compared to Pennsylvania’s 54% rate.
Whitmer referenced Pennsylvania as a reason for the tax increase in her budget proposal:
“Pennsylvania casinos, one of the nation’s largest markets, generated 10% less casino profits
from online gaming but paid roughly 50% more tax, compared to the internet casinos in Michigan.”
Whitmer explained her plan to increase taxes:
“The governor’s budget proposal introduces a new higher marginal tax rate that applies only after a casino operator earns more than $185 million in AGR within a year. For revenues above this threshold, the tax rate on online games would increase by 8 percentage points, bringing the total rate to 36%.
“The majority of internet casino profit comes from online slot machines, and Michigan’s new 36% tax rate would remain significantly lower than Pennsylvania’s 54% rate for internet slots.”
Judging off 2025 revenue, only FanDuel Casino, DraftKings Casino and BetMGM Casino would be subject to the new tax hikes. The rest of the platforms would remain at that 20% range.
Whitmer is accounting for an additional $135.5 million in new tax revenue for the fiscal year, which would go “directly to the Medicaid Benefits Trust Fund in support of health and wellness programs.”
In addition, Whitmer said the revenue would also benefit the following:
“The revenue would also support the Michigan Agricultural Equine Industry Development Fund.
“Under current law, the fund receives up to $3 million annually. This proposal would increase that cap to a total of $5 million in FY27, $10 million in FY28, and $15 million each year thereafter.”
Potential for sports wagering tax
Whitmer also plans on imposing a pre-wager tax on sports platforms. Currently, sports wagering apps are taxed at an 8.4%, which is 28th out of 30 legal states, according to the governor.
A similar structure was introduced in Illinois, as Whitmer explained the new process:
“A new 25 cents per-bet tax would apply on a licensee’s first 20 million wagers annually. For wagers after 20 million, the tax on those would increase to 50 cents per bet.”
The increase would generate an additional $38.8 million, which would also benefit the Medicaid Benefits Trust Fund.
It should be noted that an Illinois lawmaker has proposed legislation that would repeal the state’s per-bet tax enacted last year. Illinois has seen a significant drop in betting volume since the tax was added.
How this impacts Michigan bettors
This could certainly impact Michigan bettors on both fronts. From an iGaming standpoint, top operators could offer less promotions, especially if they are paying a steeper tax.
It could certainly even the playing field a bit for the second-tier operators to gain some market share, if their tax rate stays the same.
On the sports wagering side, bettors are going to be losing 25 cents to 50 cents right off the top, which could also affect the way operators offer promotions.
