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Could higher cigarette and gambling taxes help protect Medicaid in Michigan? What Governor says
Michigan Gov Gretchen Whitmer's Fiscal Year 2027 budget proposes new taxes on tobacco, vaping, and online gambling to boost Medicaid funding.
Michigan Gov Gretchen Whitmer has proposed a series of new and increased taxes on tobacco products, vaping items and online gambling as part of her Fiscal Year 2027 budget plan, aiming to generate revenue to help safeguard Medicaid funding.
The proposal, outlined by the administration, would require approval from the Michigan Legislature before any changes take effect.
Tobacco and nicotine taxes would rise
Under the plan, Michigan’s cigarette tax would increase by $1 per pack, raising it from $2 to $3.
The budget also proposes raising taxes on other tobacco products — such as cigars and smokeless tobacco — from 32% of the wholesale price to 57%.
For vaping devices and other alternative nicotine products that are not traditional tobacco, the proposal introduces a new excise tax equal to 57% of the wholesale price.
State officials say the changes are intended to bring in additional revenue while discouraging tobacco and nicotine use.
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Online gambling fees and tax changes proposed
The budget also targets online gambling, including sports betting.
Key provisions include:
- A per-wager fee of 25 cents per bet for a sportsbook’s first 20 million wagers annually
- A 50-cent fee per bet after that threshold
- Eliminating the ability for sportsbooks to reduce taxable revenue by deducting promotional “free play” credits
For internet gaming platforms, the proposal would increase taxes on the largest online casino operators by raising the top-tier rate to 36%.
Another component of the proposal is a 4.7% tax on digital advertising revenue, with certain exemptions for broadcast and news media.
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Funding goal: protecting Medicaid
The Whitmer administration says the proposed tax changes are part of a broader strategy to generate new revenue and help protect funding for Medicaid, the public health insurance program serving low-income residents.
The budget proposal must be negotiated and approved by state lawmakers before any of the tax changes could be enacted.
If adopted, the measures would represent a significant shift in how Michigan taxes tobacco, nicotine alternatives and online gambling, as per the administration.
