A decline in federal funding has led Michigan Gov. Gretchen Whitmer to dig deeper into gaming revenue with higher taxes.
The increased gaming taxes would add an estimated $195.4 million in taxes in fiscal 2027, which begins Oct. 1. The proposed tax increases to both online casinos and sports betting take influence from Illinois and specifically target operators that are doing more business.
Whitmer proposed a 36% online casino tax tier that kicks in once casinos top $185 million in annual adjusted gross receipts. That is an 8 percentage point increase from the current 28% ceiling.
The sports betting tax is identical to what Illinois implemented over the summer. Operators would pay 25 cents per bet for the first 20 million annual bets followed by 50 cents per bet after that, though some operators chose to pass the fees directly to the customer.
Total taxes up about a third
While not an apples-to-apples comparison, the estimated fiscal 2027 tax gains would reflect a 31.3% increase on the total online casino and sports betting taxes from calendar 2025.
Online casino contributed the vast majority of that with $597.5 million in taxes, according to the December online gaming revenue report from the Michigan Gaming Control Board. Sports betting contributed $27.1 million.
That increase will likely be overwhelmingly funded out of the pockets of DraftKings, FanDuel and BetMGM. All three reported significantly more than $185 million in AGR in 2025. Michigan does not break down bets by operator but only DraftKings and FanDuel top the 20 million bets mark annually in Illinois, and Illinois is a much larger sports betting market than its northern neighbor.
While the General Briefing Papers notes that only three online casinos passed the $185 million AGR threshold last year, that appears to be wrong according to state data. BetRivers also topped the mark with $212.1 million in AGR and Caesars was a close fifth at $182.1 million.
Neither the budget office nor the governor’s office responded to LSR before publication regarding the discrepancy.
Michigan: at least we aren’t Pennsylvania
The briefing highlighted the key areas of new income for the fiscal 2027 budget and pointed out that the new online casino tax rate would still be lower than Pennsylvania‘s.
Based on the three unnamed operators called out in the briefing, the new tier would generate an estimated $135.5 million in new tax revenue in fiscal 2027 alone.
“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,” reads the document.
Michigan currently taxes online casino at a graduated rate between 20% and 28%. While PA taxes online slots at 54%, online tables are taxed at 16%.
No more sports betting promo deductions
Along with the per-bet fee that would generate an estimated $38.8 million in fiscal 2027, Whitmer is also calling for the end of sports betting promotional deductions.
Removing unlimited promotional deductions has been a common revision to sports betting laws. Maryland is considering a bill that would give its regulator the ability to lower allowed deductions as well.
Those deductions coupled with Michigan’s 8.4% tax rate have kept returns from sports betting relatively modest.
No more deducted promotional costs adds an estimated $21.1 million to the fiscal 2027 budget.
