Internet Gambling Drains School Funding

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NONPARTISAN HOUSE FISCAL AGENCY: INTERNET GAMBLING WOULD DRAIN MICHIGAN’S SCHOOL FUNDING

“The State School Aid Fund (SAF) likely would realize reduced revenues under House Bill 4926”

Multiple HFA studies have concluded the Lawful Internet Gaming Act’s 8 percent tax rate for internet gaming licensees – which undercuts the 19-plus percent rate for land-based casinos by more than 11 points – would have a devastating effect on Michigan’s School Aid Fund. Here’s why: while land-based casinos distribute a full 42.6 percent of revenues generated by their 19 percent tax rate to the SAF, online operators would only contribute a mere 5 percent of the revenues generated by their 8 percent tax rate. In other words, a much smaller portion of a much smaller pie.

  • “Currently, casino adjusted gross receipts are levied a casino wagering tax of 19%. Of that amount, 42.6% is distributed to the SAF. Under the bill, the adjusted gross receipts would be taxed at a rate of 8%, with 5% of the tax revenues deposited in the School Aid Fund. Therefore, every $1 in gross gaming revenues lost at brick and mortar casinos due to the introduction of internet gaming would result in a 7.7-cent loss to the SAF.”
  • Additionally, “internet gaming presumably would also reduce lottery sales, mainly by diverting participants…Net revenue from iLottery is deposited in the SAF. Therefore, any diminishment in iLottery sales from the introduction of online gaming would result in lower SAF transfers from the Bureau of State Lottery.”

AND REDUCE DETROIT’S REVENUES

“The bill likely would reduce City of Detroit revenues from casino gaming sources”

The HFA also warns about how the introduction of internet gambling would diminish revenues for state and local governments – including the city of Detroit. Given that land-based casinos distribute nearly 60 percent of revenues generated by their 19 percent tax rate to Detroit, online operators would have to bring in $2.47 in gross gaming revenues for every $1 reduction in brick and mortar casino gross gaming revenues just to bring in an equal amount of revenue.

  • “Currently, casino adjusted gross receipts are levied a casino wagering tax of 19%. Of that amount, 57.4% is distributed to the City of Detroit. In 2017, the City of Detroit received approximately $152.7 million…The net result would be loss of 6.5 cents for every $1 transferred from brick and mortar gaming to internet gaming. Put another way, for the City of Detroit to receive an equal amount of revenue, internet gaming would have to bring in $2.47 in gross gaming revenues for every $1 reduction in brick and mortar casino gross gaming revenues.”

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