The Hidden Consequences of the GOP Tax Bill on Gamblers
An obscure provision in the Republican megabill has sparked significant concern among professional gamblers, sports bettors, and lawmakers. This provision, which was included in the tax and spending bill signed into law by President Donald Trump, reduces the deduction for gambling losses from 100 percent to 90 percent. As a result, many individuals who gamble for a living could face unexpected tax liabilities on what they refer to as “phantom” winnings.
Representative Dina Titus (D-NV) has been vocal about the negative impact of this change. She explained that if someone wins $100,000 and loses $100,000, they would still owe taxes on the $10,000 difference because only $90,000 can now be deducted. “It’s just really not good policy to have you paying taxes on phantom money that you didn’t earn,” she said.
The 100-percent deduction on gambling losses up to the amount of reported winnings has been part of U.S. tax policy for over five decades. However, according to the American Gaming Association, congressional sources indicated that the Senate had to adjust the provision to meet reconciliation rules. This change was made because Republicans did not account for the costs of extending the 2017 Trump tax cuts against the deficit.
A gambling industry official told CNN that this adjustment was purely procedural and not related to any specific policy goals regarding gambling. Despite this, the change has raised concerns among various stakeholders in the gambling community.
Titus introduced the one-page FAIR Bet Act to restore the previous 100-percent deduction rate. She argued that the GOP change could push gamblers toward offshore casinos, where they wouldn’t pay U.S. taxes, or encourage them to misrepresent their gambling losses.
“It’s not just professional poker players who will be affected,” Titus emphasized. “It’s anyone who gambles, whether it’s betting on a football game, playing a slot machine, or being a small poker player. The impact is wide-reaching.”
Senator Catherine Cortez Masto (D-NV) is also working on a solution in the Senate. Professional gamblers who wager large amounts of money for relatively small profits say the change could force them out of business entirely.
Phil Galfond, a professional poker player and coach, expressed his concerns about the impact of the new rule. “In poker, it means the players who are scraping by—earning their living on an especially high-volume, low-edge—are not going to be able to make it,” he said. “It just doesn’t feel right that you can have a losing year and then pay tax on that losing year.”
Tax professionals who specialize in gambling taxes have warned that the GOP bill puts both professionals and high rollers at risk of being taxed on non-existent winnings. Russell Fox, a gambling tax specialist, noted that certain types of gambling, particularly those with high volume and low margins, may become untenable under this law. He added that sports betting and other forms of gambling that professionals rely on could face significant challenges.
The implications of this change extend beyond just the financial aspect. Many in the gambling community feel that the policy shift undermines the integrity of their profession and creates unnecessary burdens. As the debate continues, there is a growing call for a reconsideration of the provision to ensure that it does not disproportionately affect those who rely on gambling as a source of income.
With ongoing discussions in Congress and the potential for further legislative action, the future of gambling taxation remains uncertain. The concerns raised by lawmakers, professionals, and bettors highlight the need for a balanced approach that considers the unique circumstances of those involved in the gambling industry.