Michigan’s Senate Bills 1193 and 1194: What Failure Means for Gambling Taxation

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The failure of Michigan’s Senate Bills 1193 and 1194 to advance in 2024 signifies that the state’s gambling tax framework will remain intact, at least for the time being. These proposals, introduced by Senators Sam Singh and Jeremy Moss, aimed to adjust tax rates and allocation methods to generate additional revenue for various state initiatives. However, insufficient support for the measures means Michigan will continue to uphold its current gambling tax system, which remains among the most operator-friendly in the United States.

Proposed Changes in Senate Bill 1193

Sports Betting Tax Adjustments

SB 1193 aimed to implement a slight increase in the sports betting tax, raising it from 8.4% to 8.5%. While the proposed 0.1% hike might have seemed negligible, its intent was to ensure additional funds were directed toward critical state services. Despite its modest nature, the measure failed to secure widespread support, leaving sports betting operators in Michigan unaffected by any changes.

iGaming Tax Tiers Explained

The proposal also included changes to Michigan’s online casino gaming tax structure. Under the current framework, tax rates for iGaming operators are based on annual revenue performance:

Less than $4 million: 20%
$4-8 million: 22%
$8-10 million: 24%
$10-12 million: 26%
$12 million or more: 28%

SB 1193 sought to increase each tier by a single percentage point, aiming for a gradual adjustment that would have provided more resources to state programs without placing an undue burden on operators.

Revised Tax Allocation in Senate Bill 1194

Currently, Michigan’s gambling tax revenue is distributed as follows:

65% to the Internet Gaming Fund, which supports state oversight and regulation of online gaming.
30% to services in Detroit, aiding the city’s economic and community development.
5% to the Agriculture Equine Industry Development Fund, which bolsters Michigan’s horse racing sector.

SB 1194 proposed redistributing this revenue to:

63.5% for the Internet Gaming Fund, a slight reduction.
31% for Detroit services, providing more support for the city’s infrastructure and public projects.
5.5% for the Agriculture Equine Industry Development Fund, encouraging growth in Michigan’s equine industry.

The suggested reallocation aimed to address Detroit’s needs more comprehensively while also supporting rural industries. However, despite its potential benefits, the measure lacked the momentum needed to pass.

Why the Bills Failed to Gain Traction

Several factors contributed to the lack of progress for SB 1193 and SB 1194. Although the proposed changes were relatively minor compared to tax hikes in other states, stakeholders expressed concerns over their necessity and potential impact. Michigan’s gambling tax rates are already competitive, with provisions allowing sportsbooks to deduct promotional expenses from taxable revenues. This operator-friendly approach makes the state an attractive market for gambling businesses. The reluctance to disrupt this balance may have played a significant role in the bills’ stagnation.

Implications for Michigan’s Gambling Tax Landscape

The failure of these bills means Michigan will retain its status as a gambling-friendly state, maintaining one of the most favorable tax structures in the industry. Key benefits of the current system include:

Low Tax Rates: Competitive rates ensure operators can thrive while still contributing to the state’s economy.
Promotional Deductions: Sportsbooks can deduct promotional spending, reducing their overall tax burden and encouraging player engagement.
Stable Allocation System: The current tax distribution model effectively supports regulatory efforts, local communities, and rural industries.

For operators, the unchanged framework provides stability and predictability, enabling them to focus on expanding their offerings and enhancing player experiences.

Potential for Reintroduction in 2025

While the failure of SB 1193 and SB 1194 means no immediate changes to Michigan’s gambling tax structure, the possibility of reintroducing similar measures in the future remains. Senators Sam Singh and Jeremy Moss, along with other proponents, could revise and reintroduce these proposals with adjustments aimed at garnering broader support. If reintroduced, the focus will likely remain on balancing operator interests with the state’s economic and community needs.

Michigan’s Position in the National Gambling Market

Michigan’s current approach to gambling taxation places it among the most favorable states for operators. Its low rates and promotional deductions provide a competitive edge, attracting operators to invest in the market. The state’s regulatory framework has also ensured a robust and well-managed gambling ecosystem, fostering trust among operators and players alike.

In contrast, many other states have implemented stricter tax policies, leading to challenges for operators in maintaining profitability. Michigan’s relatively lenient stance not only promotes market growth but also encourages innovation and investment, positioning the state as a leader in the gambling industry.

Conclusion: The Senate Bills

The failure of Senate Bills 1193 and 1194 to advance in 2024 preserves Michigan’s status quo in gambling taxation. While the proposals aimed to introduce modest tax increases and redistribute revenue more equitably, their lack of support underscores the state’s commitment to maintaining an operator-friendly environment. For now, Michigan remains one of the most attractive markets for gambling operators, with its low taxes, promotional deductions, and stable allocation framework offering significant advantages.

Should the measures’ proponents decide to revisit these ideas in 2025, the debate over balancing operator benefits with state needs will undoubtedly resurface. Until then, Michigan’s gambling industry is poised for continued growth under its existing framework.

FAQs About Michigan’s Senate Bills 1193 and 1194

1. What are Michigan’s Senate Bills 1193 and 1194?

Senate Bills 1193 and 1194 were legislative proposals introduced in Michigan in 2024. SB 1193 aimed to slightly increase tax rates on sports betting and online casino gaming, while SB 1194 sought to revise the allocation of gambling tax revenues to better support Detroit and the equine industry.

2. What changes were proposed under Senate Bill 1193?

SB 1193 proposed a 0.1% increase in the sports betting tax rate, raising it from 8.4% to 8.5%. It also suggested increasing the tax rates for online casino gaming by 1% across all revenue tiers.

3. How are Michigan’s online casino gaming tax rates currently structured?

Michigan’s iGaming tax rates are based on annual revenue:

Less than $4 million: 20%
$4-8 million: 22%
$8-10 million: 24%
$10-12 million: 26%
$12 million or more: 28%

4. What changes were proposed under Senate Bill 1194?

SB 1194 aimed to adjust the allocation of gambling tax revenues. It proposed:

Reducing the Internet Gaming Fund’s share from 65% to 63.5%.
Increasing Detroit’s share from 30% to 31%.
Increasing the Agriculture Equine Industry Development Fund’s share from 5% to 5.5%.

5. Why did the bills fail to progress?

The proposals did not gain enough support due to concerns about their necessity and potential impacts. Michigan’s gambling tax structure is already considered operator-friendly, with low rates and provisions like promotional spending deductions, making stakeholders hesitant to alter it.

6. What is the current allocation of Michigan’s gambling tax revenues?

As of now, Michigan distributes gambling tax revenues as follows:

65% to the Internet Gaming Fund.
30% to services in Detroit.
5% to the Agriculture Equine Industry Development Fund.

7. How does Michigan’s gambling tax framework compare to other states?

Michigan has one of the most operator-friendly tax structures in the U.S. It features competitive tax rates and allows sportsbooks to deduct promotional spending from taxable revenues, making it an attractive market for operators.

8. Will these measures be reintroduced in the future?

It is possible. The proponents of the bills, Senators Sam Singh and Jeremy Moss, could choose to revise and reintroduce the measures in 2025, potentially with adjustments to address stakeholder concerns.

9. How does Michigan benefit from its current gambling tax system?

Michigan’s operator-friendly framework encourages investment and innovation in the gambling market. It ensures a stable revenue stream for the state while maintaining a competitive edge that attracts gambling operators.

10. What does the failure of these bills mean for Michigan’s gambling industry?

The failure means that Michigan will continue with its existing tax structure, providing stability for operators and retaining its reputation as a gambling-friendly state.