Mississippi’s Casino Tax Reform: Transition from Tiered to Flat Rate Amid Online Gambling Stalemate

In February 2025, Mississippi’s House Ways and Means Committee advanced legislation (House Bill 1881) proposing a significant overhaul of the state’s casino tax structure.

The bill seeks to raise the total tax rate on gross gaming revenue from 12% to 16%, shifting the state’s share from 8% to 12% while maintaining local governments’ 4% allocation. This move, framed as retaliation against stalled online gambling legalization efforts, highlights the tension between evolving gaming markets and Mississippi’s reliance on brick-and-mortar casino revenue.

The proposal comes at a critical juncture for Mississippi’s gaming industry, which has faced mounting pressure from neighboring states that have expanded their gambling offerings to include online options, threatening Mississippi’s historical position as a regional gambling destination.

Key Takeaways

• Tax Structure Shift: Mississippi proposes replacing its graduated casino tax system (4%-8%) with a flat 16% rate, representing a 33% increase in the effective tax burden.
• Revenue Projections: The reform aims to generate an additional $50 million annually for state coffers while maintaining local governments’ 4% share.
• Political Motivation: The bill emerged largely as leverage to pressure the Senate into reconsidering online sports betting legislation, which has failed three years in a row.
• Industry Opposition: Casino operators, particularly smaller venues, warn the tax hike could reduce capital investment and accelerate Mississippi’s competitive decline versus neighboring states.
• Balanced Alternatives: Hybrid models combining moderate physical casino taxation with new online gambling revenue streams offer more sustainable long-term solutions.
• Regional Context: Mississippi risks falling behind as Arkansas, Louisiana, and Tennessee modernize their gambling frameworks with digital options and competitive tax structures.

Historical Context of Mississippi Gaming

Mississippi’s journey as a gambling destination began in 1990 with the passage of the Mississippi Gaming Control Act, which authorized casino gambling along the Mississippi River and Gulf Coast.

The state quickly emerged as the South’s premier gambling destination, with Tunica County transforming from one of America’s poorest regions to a thriving tourist area by the mid-1990s. The industry weathered significant challenges, including Hurricane Katrina in 2005, which destroyed or damaged 13 Gulf Coast casinos and required massive reinvestment to rebuild.

The current tax structure, established in 1994 and largely unchanged for three decades, was designed to encourage industry growth during this developmental phase. According to gaming historian Alan Meister, “Mississippi’s graduated tax system was revolutionary for its time, creating the conditions for a casino boom that other states later attempted to replicate.”

By 2005, the state boasted 29 commercial casinos generating $2.8 billion in annual revenue, employing over 30,000 Mississippians directly.

Current Tiered Tax Structure

Mississippi’s existing casino tax system employs a graduated rate based on monthly gross gaming revenue (GGR):

• 4% on revenue ≤ $50,000/month
• 6% on revenue between $50,001–$134,000/month
• 8% on revenue > $134,000/month

Local governments receive an additional tiered tax:

• 0.4% (≤$50k), 0.6% ($50k–$134k), and 0.8% (>$134k)

Combined, these tiers historically yielded a 12% total tax, with 8% directed to state coffers and 4% to localities.

The tiered approach was initially designed to assist smaller casino operations in establishing footholds in the market, though in practice, virtually all commercial casinos generate sufficient monthly revenue to place them in the highest bracket. According to Mississippi Gaming Commission data, the average casino in the state generates approximately $6.7 million in monthly revenue, well above the $134,000 threshold for the highest tax tier.

The current structure has generated approximately $250-275 million annually for the state in recent years, accounting for roughly 3% of Mississippi’s general fund revenue. Counties and municipalities hosting casinos received an additional $125 million collectively in 2024, representing a significant portion of some local budgets, particularly in smaller Gulf Coast and Tunica County communities.

Proposed Flat Tax Increase

HB 1881 replaces the tiered system with a flat 16% rate:

• 12% to the state (up from 8%)
• 4% to local governments (unchanged)

This 33% increase aims to generate $50 million annually, offsetting revenue losses from illegal online sports betting, which proponents claim costs Mississippi $26M–$80M yearly. Representative Casey Eure, sponsor of previous online gambling bills, explained: “Mississippians are already gambling online through offshore sites or by crossing state lines. We’re simply trying to recapture revenue that’s already leaving our state while protecting our brick-and-mortar casinos.”

The legislation specifies implementation would begin July 1, 2025, providing casinos six months to prepare for the increased tax burden. The bill includes no provisions for offsetting tax credits or deductions, though it does maintain existing deductions for promotional play and comps that casinos offer to frequent customers.

According to the Mississippi Department of Revenue’s fiscal impact statement, based on 2024 revenue figures, the change would increase state gaming tax collection from $274 million to approximately $325 million annually, assuming no change in overall gaming activity or casino closures resulting from the increased tax burden.

Political Context and Stakeholder Opposition

The bill emerged as a rebuke to the Senate’s repeated rejection of online gambling legislation.

House Ways and Means Chair Trey Lamar (R) argued that “a small handful of casinos” blocked prior efforts, despite widespread illegal betting. In a particularly heated committee hearing, Lamar stated: “If these casinos won’t work with us on bringing Mississippi gaming into the 21st century, perhaps they need additional motivation to come to the table.”

Key dynamics include:

1. Inter-Chamber Conflict

The House has passed online gambling bills since 2022, but Senate Gaming Committee Chair David Blount (D) criticized HB 1881 as punitive, noting it coincided with broader tax reforms threatening local budgets.

“This approach pits different segments of our gaming industry against each other rather than finding a solution that works for everyone,” Blount said in a statement released after the committee vote. “Using tax policy as leverage rather than focusing on good governance benefits no one.”

Governor Tate Reeves has maintained a cautious stance, emphasizing the need to protect Mississippi’s physical casino industry while acknowledging the reality of changing consumer preferences. “We need a comprehensive approach to gaming that preserves the tremendous investment made in our communities while addressing technological changes,” Reeves said at a recent Mississippi Economic Council meeting.

2. Casino Industry Resistance

Smaller casinos, lacking resources to compete in online markets, oppose digital expansion.

Boyd Gaming’s acquisition of Resorts Digital underscores larger operators’ adaptability, while regional venues fear the tax hike could erode margins amid stagnant land-based revenue.

The Mississippi Gaming and Hospitality Association, representing 26 casinos, released a statement opposing the tax increase: “This proposal threatens jobs, capital investment, and the economic viability of many properties operating on thin margins. The timing couldn’t be worse as we face increased competition from neighboring states and work to recover from post-pandemic challenges.”

Larry Gregory, executive director of the association, noted that several properties, particularly in Tunica County, operate with profit margins below 5%, making the proposed tax increase potentially devastating. “We’ve already seen five casinos close in Tunica over the past decade. This tax could accelerate that trend,” Gregory warned during testimony to the House committee.

3. Comparative Pressures

Neighboring Tennessee generates $140M annually from legal online gambling, intensifying pressure on Mississippi to modernize. However, the state’s 2023 casino revenue declined 4% YoY to $2.5B, lagging behind Louisiana ($2.7B) and Illinois ($2.5B).

Arkansas’s 2018 casino expansion and 2022 mobile sports betting launch have further eroded Mississippi’s competitive position. According to the American Gaming Association’s 2024 State of the States report, Mississippi’s gaming growth rate of 1.2% ranked 18th nationally, well below the national average of 5.7%.

Industry analysts from Goldman Sachs noted in a February 2025 report: “Mississippi’s refusal to adapt to changing consumer preferences represents the most significant threat to its gaming industry since Hurricane Katrina. The proposed tax increase would likely accelerate market share losses to neighboring jurisdictions.”

Economic Implications

Obviously there are some serious economic implications

1. Local Government Impact

Under the current system, Biloxi – Mississippi’s largest gaming hub – allocates its 3.2% local share as:

• 40% general fund
• 20% public safety
• 20% education
• 10% county education
• 10% county safety

The proposed state tax increase would not alter local allocations but risks reducing casino profitability, potentially slowing capital investments that drive municipal jobs and tourism. Biloxi Mayor Andrew “FoFo” Gilich expressed concern: “Our city budget derives nearly 40% of its revenue from gaming taxes and fees. Any policy that threatens casino profitability ultimately threatens essential city services.”

A 2024 study by the University of Southern Mississippi found that casino-hosting municipalities in the state allocate approximately 65% of gaming tax revenue to infrastructure projects, education, and public safety initiatives. Pascagoula, D’Iberville, and Bay St. Louis have all recently issued bonds backed by anticipated gaming tax revenue to fund critical infrastructure improvements.

2. Competitive Disadvantage

Mississippi’s 16% rate would exceed regional rivals:

• Louisiana: 15%–35% tiered rate (averaging 21.5% effective rate)
• Tennessee: 20% online sports betting tax with no retail casinos
• Arkansas: 13%–20% casino tax based on revenue tiers
• Alabama: Newly legalized casinos at 15% flat rate as of 2024

Analysts warn higher taxes could push operators to invest in friendlier jurisdictions like Alabama, which legalized casinos in 2024. Penn Entertainment, which operates two Mississippi properties, announced in January 2025 a $780 million investment in a new Alabama resort casino following that state’s legalization – capital that might otherwise have been directed to Mississippi expansion.

Morgan Stanley gaming analyst Thomas Allen noted: “Casino operators increasingly view their capital allocation through a regional lens. Properties with higher tax burdens must generate commensurately higher returns to justify investment, creating a self-reinforcing cycle of underinvestment in higher-tax jurisdictions.”

3. Online Gambling Standoff

HB 1881 frames the tax hike as a bridge to future online legalization, yet stakeholders remain divided. While DraftKings and FanDuel lobby for market access, tribal casinos and conservative groups resist, citing addiction concerns.

The Mississippi Band of Choctaw Indians, which operates three tribal casinos in the state under federal oversight, has maintained neutrality on the tax proposal since it doesn’t directly affect their operations. However, tribal leadership has expressed opposition to online gambling expansion without protections for their exclusive rights in certain territories.

Religious organizations, including the Mississippi Baptist Convention, have consistently opposed gambling expansion of any kind. Executive Director Shawn Parker stated, “Online gambling would bring casinos into every home in Mississippi, exposing our youth and vulnerable populations to addiction risks without proper safeguards.”

Comparative Analysis: Tiered vs. Flat Tax Models

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Economists from the Mississippi Economic Policy Center have criticized the flat tax approach, arguing it fails to account for varying profitability levels across the state’s casino markets.

Executive Director Jennifer Williams commented, “Casinos in Tunica face fundamentally different market conditions than those on the Gulf Coast. A one-size-fits-all approach ignores these realities and could accelerate consolidation in struggling markets.”

Employment and Economic Development Considerations

The Mississippi gaming industry directly employs approximately 22,500 workers (down from a pre-pandemic peak of 28,000), with an average annual salary of $46,800 including benefits and tips – significantly above the state’s median wage.

Including indirect employment, the American Gaming Association estimates the industry supports over 37,000 jobs statewide.

MGM Resorts, which operates the Beau Rivage in Biloxi (the state’s largest casino employer with 3,200 workers), has expressed concern about potential workforce reductions. Regional President Brandon Dardeau noted, “Any significant tax increase would require operational adjustments, potentially including staffing levels, to maintain profitability targets.”

Tourism officials worry that reduced casino marketing budgets resulting from higher taxation could impact Mississippi’s $7.5 billion annual tourism economy. According to Visit Mississippi, casino visitors spend an average of $425 per trip on non-gambling activities including lodging, dining, and entertainment – revenue that supports thousands of additional jobs.

Legislative Outlook and Alternatives

Though HB 1881 stalled in the House on February 28, its proposal signals growing impatience with legislative gridlock.

Sources close to leadership indicate the bill may be revived in the final weeks of the session as a bargaining chip in broader budget negotiations. Representative Cedric Burnett (D-Tunica) suggested the bill faces significant opposition from lawmakers representing casino districts: “This isn’t just an industry issue; it’s about protecting jobs in communities where casinos are the economic foundation.”

Viable alternatives include:

1. Hybrid Tax Model Adopting Tennessee’s approach: 20% online tax + 6.75% retail rate, generating $140M/year without burdening physical casinos. Virginia implemented a similar system in 2023, creating what gaming economist Alan Sorensen called “the complementary model,” where online operations drive traffic to physical casinos through cross-promotion and shared loyalty programs.
2. Tiered Online Licensing Charging lower fees for small casinos to partner with platforms like BetMGM, as Maryland’s 2024 framework demonstrates. Under Maryland’s system, casinos with annual revenue below $50 million pay licensing fees 40% lower than larger operators, enabling broader industry participation in online expansion.
3. Revenue Sharing Directs online proceeds to problem gambling programs, mirroring New Jersey’s 1.25% levy on iGaming revenue. Public health advocates have praised New Jersey’s model for creating sustainable funding for addiction services and responsible gambling initiatives.
4. Phased Implementation Introducing graduated tax increases tied to revenue benchmarks, as Michigan implemented in its 2024 tax reform. This approach would cushion the impact on casino operations while providing fiscal predictability for state budgeting purposes.

Senator Robert Johnson (D-Natchez) has proposed compromise legislation to maintain the current tax structure for existing casinos while implementing higher rates for new properties and creating a separate framework for online gambling. “We need a solution that respects investments already made while creating competitive opportunities for future growth,” Johnson said.

Future Outlook and Implications

The tax debate occurs against the backdrop of broader changes in the U.S. gambling industry.

Since the Supreme Court’s 2018 decision striking down the federal ban on sports betting, 38 states and the District of Columbia have legalized sports wagering in some form, with 28 permitting mobile betting. Mississippi’s 2018 sports betting legalization restricted wagering to casino premises, limiting its revenue potential compared to states with mobile options.

Industry consolidation presents another challenge, as major operators like Caesars Entertainment, MGM Resorts, and Penn Entertainment increasingly focus capital on high-growth jurisdictions with favorable regulatory environments. Eight of Mississippi’s 26 casinos have changed ownership since 2020, with private equity firms acquiring several smaller properties – often a precursor to cost-cutting measures or even closure.

The University of Nevada’s Center for Gaming Research projects that states without comprehensive gambling frameworks, including mobile options, will see their market share decline by 35-40% over the next decade as consumer preferences continue shifting toward digital engagement.

Conclusion

Mississippi’s casino tax debate encapsulates broader tensions between legacy industries and digital innovation.

While the proposed flat rate addresses immediate revenue gaps, it risks undermining the competitiveness of a sector contributing 4.3% of state GDP. A balanced solution – pairing moderate tax hikes with phased online legalization – could secure Mississippi’s position as the South’s gaming hub while funding critical infrastructure and education initiatives.

For policymakers, the fundamental question extends beyond tax rates to Mississippi’s long-term vision for its gaming industry. As Senate Finance Committee Chair Josh Harkins observed, “We’re really deciding whether Mississippi wants to lead or follow in the next chapter of American gaming. Tax policy is just one piece of a much larger strategic puzzle.”

The state finds itself at a crossroads similar to its position in 1990, when bold legislation transformed Mississippi into a gaming destination. Today’s decision will similarly echo for decades, determining whether Mississippi can adapt to changing consumer preferences or watch its once-thriving industry gradually decline amid regional competition.

Industry veteran and former Mississippi Gaming Commission director Allen Godfrey perhaps summarized the situation most succinctly: “Mississippi revolutionized Southern gaming once before. The question now is whether we can do it again.”