Lose bets, pay taxes?
Republicans' "Big Beautiful Bill" included a dumbfounding tax provision that has gamblers apoplectic.
I DON’T THINK I’VE EVER SEEN gamblers so irate. Earlier this week, it came to light that President Trump’s mammoth tax bill includes a subtle change to the way gambling losses can be deducted from federal income taxes. Professional sports bettors are treating this as an extinction-level event, and after I spent a few days investigating, that doesn’t seem like an overreaction.
I explain why in The Washington Post today. Even more incendiary is the fact that as a result of this change to the tax code, recreational gamblers could end up losing money on their wagers yet still owe income taxes.
Some of the words I heard used to describe this:
Asinine.
Ridiculous.
Astounding.
One of the dumbest things I’ve ever heard.
Here’s the article:
I realize that few people shed tears for the plight of professional gamblers, but again, although they’re likely hit hardest by this provision, it also means some recreational gamblers will be in for the surprise of having to pay taxes on what one CPA called “phantom income.”
Still, I could imagine people hearing this and saying, “Yeah, that’s odd, but why are we spending time worrying about gamblers instead of what it means to slash access to health insurance, food benefits, and clean-energy initiatives?”
That’s a valid perspective, but I also think slipping something so disruptive into a 940-page bill at the last minute shouldn’t stop us evaluating who it helps, who it hurts, and whether it’s a worthwhile component of the legislation.
One angle I was only able to touch on in the Post: Congress’s nonpartisan tax committee projects that limiting how much gamblers can deduct in losses will generate $1.1 billion in added tax revenue over eight years. But that doesn’t take into account the likelihood that the deduction limit will discourage professional sports bettors from patronizing regulated sportsbooks. This could put a substantial debt in how much the federal government raises from the federal excise tax on sports betting: 25 cents for every $100 wagered. If sharp bettors account for roughly a quarter of all dollars wagered legally, that’s a significant share of what’s contributed via the excise tax.
There’s also the serious possibility that the deduction limit will cause some gamblers to underreport their gambling winnings. As one industry veteran put it, “If you do not believe in the morality of the tax, you're not going to believe in the morality of being honest on your taxes.”
Thank you so much to everyone who has preordered my book, Everybody Loses: The Tumultuous Rise of American Sports Gambling. If you’re wondering how to do that, you can find some of the online retailers where it’s available for preorder on Simon & Schuster’s website.
I have some more interesting newspaper reporting in the works. In the meantime, Wynnie wishes you a happy fourth of July!
Eye opening--good reporting!