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Michigan igaming bill progresses with new tax structure

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Michigan Representative Brandt Iden has seen his proposal to regulate online gaming in the state progress through the House Ways and Means Committee after he tweaked the bill to amend the tax rate for licensees. 

House Bill 4311, the Lawful Internet Gaming Act, passed the committee alongside Iden’s sports betting proposal HB4916 yesterday (October 29). This means both bills are now set to go to a full House vote.

However, with HB4311 having encountered resistance from Governor Gretchen Whitmer, centred around the proposed 8% gross revenue tax for igaming licensees, Iden has now amended the rates set out in the bill.

The flat 8% GGR tax has been replaced with a tiered structure, which will increase for the first five years after the market opens. For the first three years, operators will pay a tax of between 4% and 19% of GGR, based on revenue. 

Those that generate less than $4m from regulated igaming will pay the 4% rate, which increases to 6% for those with annual revenue of up to $8m. Licensees whose revenue falls between $8m and $10m will pay an 8% tax, which increases to 10% for those generating up to $12m, then jumps to 19% for those with revenue above $12m.

In the fourth year, the tax rate will increase across the board by 2%, then rise by a further 2% from the fifth year after the bill passes into law. This sets out a maximum gross revenue tax of 23% for those earning above $12m from online gambling. 

However it still falls far below the 40% tax rate proposed by Whitmer, in a model that would also prohibit online slots. Iden previously told iGB North America that such a high rate was “just not feasible”. 

A further amendment also looks to ease the Governor’s concerns about legal igaming cannibalizing lottery revenue. This pledges that should the contribution from the Michigan Lottery’s online arm to the State School Aid Fund fall below $70m, money will be taken from the Internet Gaming Fund to make up the shortfall.