Monday was the 20th anniversary of gaming beginning at MGM Grand Detroit, the first of the three commercial casinos in the Motor City.
The Michigan Gaming Control Board, tasked with regulating the casinos, announced the anniversary in a press release. The news comes at a time when the future of Michigan’s gaming industry is under robust debate. On the table is legislation to expand gambling to the internet, via online slots, table games, and poker. Also in the works is a bill to allow sports betting, both in-person at casinos and via statewide online/mobile sportsbooks.
The online gaming discussion in Lansing has been unfolding for years, but the debate late last year reached an inflection point when an internet gaming bill was successfully delivered to the former governor, only to receive a last-minute veto that left many scratching their heads.
Former Gov. Rick Snyder, a Republican, said in a veto letter late last year that he wasn’t sure what kind of impact the internet casino gaming bill would have on the state’s School Aid Fund, which receives more than $940 mm annually from the lottery. Current Gov. Gretchen Whitmer, a Democrat, has expressed concern that there could be less money flowing into that fund under the online gaming bill in its current form.
In its presser announcing the Detroit gambling anniversary, the MGCB stressed the positive impact the casinos have had on the School Aid Fund. It’s hard to imagine the messaging being a coincidence at this point in time, given the political debate surrounding the gaming legislation.
Benefits by the numbers
“The Detroit commercial casinos have contributed more than $2.2 billion to Michigan’s School Aid Fund for K-12 education since the MGCB issued the first commercial casino license to MGM Grand Casino Detroit on July 28, 1999,” said the presser. “The entire state tax on Detroit commercial casino wagering — 8.1% of the casinos’ net win — supports statewide K-12 classroom education.”
The Detroit casinos also pay the city a 10.9% wagering tax on their winnings.
“More than 20 years ago, Michigan lawmakers created a system for the MGCB to monitor the transfer of taxes from the casinos every weekday to the State School Aid Fund to benefit public education,” said Richard Kalm, executive director of the MGCB. “The casino tax revenue provides strong support for one of government’s primary duties: the education of our youngest citizens.”
Per the presser, the casinos paid $117 mm in wagering taxes to the state to help fund education in 2018.
In March, the MGCB came out in support of the internet gaming legislation. In other words, it wants the bill to pass. The agency is subtly putting its finger on the scale in the debate by highlighting what commercial casino gaming already does to help fund public education in the Wolverine State.
State of the online gaming debate
Michigan’s online casino legislation, H 4311, is currently stuck in neutral thanks to the governor’s reluctance to support the legislation, despite it passing both chambers of the legislature last year.
Gov. Whitmer and proponents of the online gaming bill, chiefly state Rep. Brandt Iden, the Republican sponsor of the legislation, are negotiating with regard to the tax rate and where the proceeds from the activity would go. The Democratic governor’s administration is also opposing online slots, a crucial component to a successful regulated online gaming market.
Whitmer claims that online casino gaming, offered by the Detroit casinos as well as tribal casinos, would take a bite out of the School Aid Fund thanks to cannibalization of the state lottery. Michigan’s lottery is online, offering dozens of internet instant games. Whitmer’s opposition of online slots is striking considering that casinos in Pennsylvania, one of only three states with regulated online casino gambling, have complained that lottery-style online games are too similar to traditional slot games.
Friction between state iLottery programs and commercial online casino gaming isn’t unique to Michigan.
Iden has long said that online lottery players and online casino players aren’t the same customer, so the cannibalization fears are overblown. Still, Iden has indicated he’s willing to direct all state tax revenue from online casino gambling to education, if that’s what the governor demands.
“If the governor’s office wants to earmark it all to education, I’m 100% in support of that,” Iden told Detroit News recently. “If that’s all that’s gonna take to get it done, then great.”
If only it were that simple. Whitmer’s administration proposed a tax rate of 40% on online gaming revenue above $8 mm — and that’s without online slots.
In early June, it was revealed that the admin wants the following tax rate scale for online table games:
- Up to $2.5 mm: 8%
- More than $2.5 mm, up to $4 mm: 16%
- More than $4 mm, up to $8 mm: 32%
- More than $8 mm: 40%
Whitmer’s proposed tax rates are not industry-friendly. It’s unclear how much she’s willing to budge. Separately, Whitmer thinks online/mobile sports betting should be taxed at 15%. Proponents of legal sports betting in the Wolverine State are eyeing a state tax rate about half what the governor pitched.