Trump’s Bill and the Future of Gambling Taxation

Gambling taxes — Image by lechenie-narkomanii from Pixabay

US President Donald Trump’s so-called “big, beautiful bill” poses a significant threat to professional gamblers, potentially impacting their financial futures if passed with its current stipulations. With an estimated $4.46 trillion tax revenue cut over the next decade projected by Republicans, the gambling community is particularly wary of a recent amendment affecting how gambling losses can be deducted.

The Impact of the New Tax Amendment

A new amendment to the federal spending bill makes it increasingly challenging for professional gamblers to receive fair tax treatment. The proposal limits deductible gambling losses to only 90%. Currently, gamblers can deduct their losses up to the amount of their total gambling income. If this modification passes, it means that even those who break even might find themselves obligated to pay substantial taxes on what can be termed “phantom income.”

Understanding the New Taxation

Here’s a simplified breakdown: A hypothetical gambler who wins $100,000 and loses $100,000 under current legislation pays no taxes. Under the proposed amendment, they would have to pay taxes on $10,000, as only 90% of their losses are deductible. This proposed tax structure complicates profitability and places an undue burden on an already fluctuating profession.

**Current Law**: Gamblers can deduct losses equal to their total winnings.
**Proposed Law**: Only 90% of gambling losses can be deducted.
**Tax Implication**: Tax would be levied on losses that cannot be deducted, creating a false income status.

The use of the term “decimate” draws from its Latin origins (decimatus), meaning “to destroy one-tenth.” In an ironic twist, this new tax would do just that by effectively erasing 10% of gamblers’ deductible losses, placing the onus of taxation on income that doesn’t truly exist.

The Legislative Landscape

The bill narrowly passed the Senate with a vote of 51-50, thanks to the deciding vote from Vice President JD Vance. Now, it returns to the House, which previously passed its version of the legislation without including the controversial gambling amendment. This discrepancy sets the stage for an impending legislative showdown.

Concerns About Phantom Income

Noteworthy poker professional Phil Galfond expressed grave concerns about the proposed changes on social media, likening the effects on financial obligations to “phantom income.” He elaborated on his calculations where a gambler might win $5.2 million but loses $5 million. They would end up taxed as if their earnings were $700,000, drastically misrepresenting their actual income.

**Galfond’s Example**: Winning $5.2 million, losing $5 million results in a reported income of $700,000.
**Reality**: Actual net earnings are only $200,000, creating severe taxation disparities.

Many critics argue the amendment demonstrates a fundamental misunderstanding of professional gambling dynamics, potentially driving skilled players offshore to illegal platforms devoid of consumer protection or necessary tax contributions to the US economy.

The Way Forward

The American Gaming Association (AGA), which reported an impressive $114.6 billion in US gambling revenue for 2024, has yet to release a statement. However, we can expect that lobbying efforts are likely in progress aimed at quashing this harmful measure in the House before it becomes law.

If enacted, the changes will come into effect in the 2026 tax year, with the gambling industry watching closely to see what action the House takes regarding this contentious issue. The stakes couldn’t be higher for professional gamblers who face a challenging road ahead if this legislation amplifies their tax burdens.

In conclusion, the latest legislative developments concerning Trump’s “big, beautiful bill” signify a potential watershed moment for professional gamblers in the US. As more players engage with the shifting landscape, the future of regulated gambling remains at a critical juncture.