Higher taxes might unlock Michigan online gambling

Support For Michigan Online Gambling Hinges On Taxes, School Funding

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A recent committee hearing in Michigan made it clear that the new governor has the same issues with expanded gambling as the old one.

Rep. Brandt Iden told Online Poker Report that he is working on two changes to his package of online gambling bills that he hopes will quell the concerns of the administration. These include legal online sports betting in MI as well as iGaming.

“The positive out of this is that the governor’s office is engaging on the issue,” Iden said. “The previous governor gave no indication that he wouldn’t sign the bill. I think some of these issues could have potentially been addressed last time around if the governor engaged. The governor has a team of folks working on it, and I think we can come to a landing spot.”

Iden intends to raise the proposed tax rate for online gambling and pledge more of the proceeds to Michigan’s School Aid Fund.

Governor opposed to MI online gambling bill

During the most recent hearing in the House Ways and Means Committee chaired by Iden, Chief Deputy Treasurer Jeff Guilfoyle forecast that Michigan online casino sites could cost the state up to $35.5 million due to cannibalization of casinos and the Michigan online lottery.

Iden disagrees with the premise.

“Folks from treasury admitted that they didn’t consider New Jersey in estimates because they believe that state is different than Michigan,” Iden said.

“That’s a flawed argument in my opinion. The lottery openly admits that they use their online presence to drive people to brick-and-mortar operations. The same thing is happening with online gaming in New Jersey. If we can drive more people into the casinos with iGaming, that will increase revenue and be more money for the state as well.”

Iden also contends that an iLottery player and an online gambler have different and distinct profiles.

“I think their metrics are flawed,” Iden said. “But I also understand it’s important that I put a piece of legislation in front of them that they can bring to the governor and be supportive — or at least neutral on.”

Going up: iGaming tax rate

The proposed tax rate for iGaming in Iden’s package is 8%, with an additional 1.25% in local share for the Detroit casinos. Only 5% of the state’s take would go to the School Aid Fund for K-12 education.

The casinos pay 8.1% of their land-based gambling revenue back to the state — all of it into the School Aid Fund — plus 10.9% to the city of Detroit.

“I think there is a high likelihood we’ll have to address the tax rate,” Iden said. “I’ll have meetings with stakeholders and the treasury to try to come to an understanding of some sort of increased tax rate for this. Also, I think the bill can be rewritten to direct more iGaming funds directly to the School Aid Fund.”

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Path forward for MI online gambling

Last year, the sponsor didn’t hear cannibalization concerns from the executive branch until Gov. Rick Snyder vetoed the bills.

Iden is happy to address such issues earlier this time around, and he plans to keep the bills in his committee until they have the governor’s support. In doing so, he hopes to avoid a repeat veto.

And he’s still optimistic.

“I’m confident we’ll get this done despite the comments made at the hearing,” Iden said. “One way or another, we’re going to get it done.”

Excluding a few stray days of lawmaking, the calendar lists June 27 as the last day of the session. Iden plans to escort his bill through the House before his chamber breaks for the summer.

- Matthew began writing about legislative efforts to regulate online poker in 2007 after UIGEA interfered with his hobby of playing small-stakes online poker while working as a sportswriter at the Los Angeles Daily News. Covering the topic for Bluff Magazine, PokerNews and now Online Poker Report, he has interviewed four U.S. Congressmen and 40+ state legislators. His poker writing has been cited by The Atlantic, Politico.com and CNN.com. Matt also has written on a variety of topics for Playboy Magazine, Men's Journal, Los Angeles magazine, LA Weekly and ESPN.com.
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