Do you want proof that few people in Washington read or understood the massive One Big Beautiful Budget bill before it passed into law? Look no further than the world of professional gambling.
Hidden in the bill was a new tax policy that now has many professional gamblers expressing outrage on social media and wherever else people might listen. For their part, lawmakers have no idea how it got there.
Tax change
Under the old law, gamblers could offset their legal gambling winnings with their losses. In other words, if a gambler won $10,000 during the course of the year and lost $9,000, he or she would pay income tax on $1,000, if that person itemized deductions.
Under the new budget bill, however, gamblers will be allowed, beginning in 2026, to offset their winnings with only 90% of their losses. So, that same gambler could deduct only $8,100, leaving an additional income tax burden on $900 of income he or she never realized.
The joint committee on taxation said this could raise a little more than $1 billion over time in tax revenue.
If, like me, you view the proliferation of legal gambling as a plague on society, you may be tempted to believe this is a good thing. After all, if you want less of something, simply tax it more. But there is more to this than meets the eye.
I reached out to Les Bernal, national director of the advocacy group Stop Predatory Gambling, for clarification. He said to pay attention to who is complaining about this. Hint: it isn’t the average guy who goes to a casino or uses a sports book app on his cell phone. It’s the person who gambles full-time; the “sharp.”
Aimed at average folks
The average person doesn’t care about taxes until he or she goes online with a preparation service to file a standard deduction in April. The sharp keeps an eagle eye on the ledger all the time.
Bernal said casinos and sports books would just as soon lose the sharps and keep the average folks.
“At the end of the day, this change makes the act of engaging in commercialized gambling as a citizen even more of a ripoff than it already is,” he said.
As other observers, such as Manhattan Institute legal policy fellow Tal Fortgang, have said, the pro gamblers will take their business elsewhere. Writing for the Wall Street Journal last week, he said those people might flock to prediction markets, which currently offer a variety of wagers despite being regulated as futures exchanges, not gambling ventures. They could even go offshore to friendlier foreign markets.
“Recreational bettors — the demographic policymakers ought to be worried about, because they are likely to develop addictions and other antisocial habits — won’t be similarly deterred,” he wrote.
That’s Bernal’s point exactly. Gambling businesses like to prey on these people, who lay wagers with their hearts and not their brains.
He believes industry groups such as the American Gaming Association could have killed this tax change. Axios quoted an association spokesman saying the group will work with Congress “to restore the long-standing tax treatment of gaming losses.”
Will it be repealed?
Bernal doubts this tax change will be removed.
“There’s not a grassroots movement for this anywhere in the country,” he said, other than a handful of professional gamblers. Problem gamblers are easy to pick on.
Exactly who is picking on them is hard to tell. No one in Washington seems to know who put it in the bill or how it got there.
“The riddle before us is a reminder that our lawmakers don’t always know all the relevant details of the legislation they’re being pushed to support,” wrote Hayes Brown, MSNBC opinion writer/editor. Hurrying to meet an arbitrary July 4 deadline didn’t help, either.
Bernal pulls no punches when talking about everything from state lotteries to the proliferation of sports gambling. “Commercial gambling is a con. It’s a form of consumer fraud,” he said.
He rails on how many states are forced to enthusiastically support lotteries because they need the money it collects, ignoring how the poor and minorities tend to be the biggest losers.
Lotteries, he is quick to remind me, don’t have to be honest with their advertising.
It’s true. You can look it up. Section 1307 of Title 18 of the U.S. Code specifically exempts state lotteries from laws requiring truth in advertising.
I’m not going to predict whether this new tax scheme for gamblers will remain in the law. What I do know is that Americans need to stare in the mirror and consider their growing fixation with games of chance.
As Fortgang wrote in the Journal, sports gambling alone is “a $14 billion industry growing by about 20% annually.” Mounting evidence suggests it’s not a harmless pastime. Strange new tax schemes aside, the federal government should take that seriously.