California seeking to close gambling "loophole"

Assemblymember Gray Proposes to Fund Clean Drinking Water, UC Medical Schools by Closing Gambling Tax Loophole

"Gray’s proposal is funded by closing a tax loophole which allows gamblers to deduct losing bets on their state income taxes. The loophole was created by a federal tax law to which California currently conforms. Gray’s proposal would disallow the deduction on state incomes taxes, but gamblers would retain the federal deduction. The loophole costs the state more than $300 million per year, yet benefits fewer than 150,000 people, primarily millionaires and billionaires."


https://a21.asmdc.org/press-releases/20190530-assemblymember-gray-proposes-fund-clean-drinking-water-uc-medical-schools

It may not be a large voting block, but they can influence a lot of voters, give to opposing candidates and fund investigative journalism projects so I think this probably for publicity purposes.

If Gray is too stupid to know the meaning of "loophole", how did he get elected?

Quote: sabre

If Gray is too stupid to know the meaning of "loophole", how did he get elected?

Well, we are talking he same kind and group of people who call a business using loss carry back/carry forward a "loophole." Or the deduction of any loss against income a "loophole." This is just the latest thing.

Quote: sabre

If Gray is too stupid to know the meaning of "loophole", how did he get elected?

I didn't vote for him.

Notice in the write up that it's "primarily millionaires and billionaires" who "deduct losing bets on their state income taxes." Still trying to figure out which category I fit in.

Insanity.

That's just warped thinking. One of the fairer ways to determine taxables, even with the limitation of having to exceed the standard deduction, and they want to pretend no money was spent to get any winnings. This with always having to overcome the built-in HE to win in the first place.

This is legislators essentially imposing a sin tax on gaming, if they get this passed. It will be because of moral objections to gambling and judgement of gamblers, not because it's a fair tax.

Quote: bobbartop

, yet benefits fewer than 150,000 people, primarily millionaires and billionaires."


https://a21.asmdc.org/press-releases/20190530-assemblymember-gray-proposes-fund-clean-drinking-water-uc-medical-schools

If by "millionaires and billionaires" he means the poor, ignorant, desperate and addicted.

There are 11 states that don't allow for deductions on gambling losses, and a few others that have somewhat different tax schemes.

http://www.taxabletalk.com/2016/02/13/north-carolina-added-to-bad-states-for-gamblers/

Quote: Hullabaloo

There are 11 states that don't allow for deductions on gambling losses, and a few others that have somewhat different tax schemes.

http://www.taxabletalk.com/2016/02/13/north-carolina-added-to-bad-states-for-gamblers/

I wonder how this works out in practice.

It stands to reason that a heavy gambler, even a winning one, never mind a losing one, simply wouldn't have the money.

Years ago, I remember reading that, by the letter of Ohio law, poker players were supposed to pay taxes on their winning sessions but not factor in their losing sessions. For some people, it seems like their tax liability might exceed their income under such a scheme. Of course, poker players can just lie, which such laws force them to do.

Even if it's not that extreme. Let's just say you're average to mild problem gambler makes 50k. Loses 15-20k. Hits 10-15k in taxables. (pulling these numbers out of my butt).

Is the state's plan to just start rounding these people up and jailing them when they don't have the money to pay the taxes? Then paying $50k/yr to icarcerate them? Great plan.

When Ohio approved casino's they also changed their tax laws to allow deducting losses.

Money is always tight and our "representatives" love those funds so even though they may know it's stupid they'll do it anyway.

If you're in CA and want to fight it I'd suggest you give them a scenario such as this:

Quote:

I walk into a casino and there is a slot machine that costs $1,000 to play.

I put $1,000 in the machine, pull the lever and win the lowest amount, which is $1,000.

Do you really think it's equitable that you now want to tax me when I have had no increase from the amount I started with?

Then send it to your own rep, the person who's sponsoring the law, and every media outlet you can find.

Quote: Rigondeaux

I wonder how this works out in practice.

It stands to reason that a heavy gambler, even a winning one, never mind a losing one, simply wouldn't have the money.

Years ago, I remember reading that, by the letter of Ohio law, poker players were supposed to pay taxes on their winning sessions but not factor in their losing sessions. For some people, it seems like their tax liability might exceed their income under such a scheme. Of course, poker players can just lie, which such laws force them to do.

Even if it's not that extreme. Let's just say you're average to mild problem gambler makes 50k. Loses 15-20k. Hits 10-15k in taxables. (pulling these numbers out of my butt).

Is the state's plan to just start rounding these people up and jailing them when they don't have the money to pay the taxes? Then paying $50k/yr to icarcerate them? Great plan.

No, they won't haul them off to the slammer. What they will do is automatically deduct state taxes when a jackpot is hit. That is how Indiana does it - they automatically deduct 3.5% from all signers. And no, you can't deduct gambling losses on Indiana state taxes. That 3.5% is gone for good.

Quote: DDB

No, they won't haul them off to the slammer. What they will do is automatically deduct state taxes when a jackpot is hit. That is how Indiana does it - they automatically deduct 3.5% from all signers. And no, you can't deduct gambling losses on Indiana state taxes. That 3.5% is gone for good.

Missouri takes their cut of my taxable jackpots without asking as well. It's basically a free roll for the state.
He who makes the laws gets the good end of the deal.
Imagine that.
:-/

Politicians are capable of saying some really stupid things when it is to their benefit.

This practice of taxing winning wagers and not allowing an offset for losing wagers is going to drive gamblers away from those kind of activities.

In both corporate and personal returns, California basically disallows a lot of loss deductions that are allowed at the federal level. This has been going on for a while.

For example say you have a NOL (net operating loss) carryforward in your corporation, meaning, corporate income losses from the past that you are carrying forward to deduct against future corporate income. This year, you have income in your corp. The NOL carryforward exceeds the income. At the federal level, no problem, you may deduct all of the NOL against the income, and you pay 0 tax. But at the state level not only must you pay the 800 minimum corporate tax to the state of CA, but also you must pay income tax on the income because the state disallows the full NOL deduction. The state of CA (the Franchise Tax Board) needs the revenue too badly so they have suspended allowing the full NOL deduction against all corporate income for a while now.

Quote: Hullabaloo

When Ohio approved casino's they also changed their tax laws to allow deducting losses.

Money is always tight and our "representatives" love those funds so even though they may know it's stupid they'll do it anyway.

If you're in CA and want to fight it I'd suggest you give them a scenario such as this:



Then send it to your own rep, the person who's sponsoring the law, and every media outlet you can find.

I believe this is incorrect, in Ohio you have to use AGI from federal. No deductions for losses. Also each city that the casino is registered in gets their cut of taxes on all jackpots. No recourse.

When Ohio legalized casino gambling in 2010, they also added a deduction for gambling losses effective January 1, 2013. Taxdood reported that the new budget signed into law repeals this deduction. He believes it’s retroactive; I can confirm that it is retroactive. This is bad news for amateur Ohio gamblers, but will have no impact for professional gamblers; professional gamblers can take gambling losses (up to the amount of their winnings) on their Schedule C.

Here is the list of bad states for gamblers with the reasons why:

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [1] [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, OH, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers. Because of the rescinding of the law allowing gambling losses as a deduction, Ohioans cannot deduct gambling losses on their state, city, or school district returns.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Quote: Indy70

I believe this is incorrect, in Ohio you have to use AGI from federal. No deductions for losses. Also each city that the casino is registered in gets their cut of taxes on all jackpots. No recourse.

When Ohio legalized casino gambling in 2010, they also added a deduction for gambling losses effective January 1, 2013. Taxdood reported that the new budget signed into law repeals this deduction. He believes it’s retroactive; I can confirm that it is retroactive. This is bad news for amateur Ohio gamblers, but will have no impact for professional gamblers; professional gamblers can take gambling losses (up to the amount of their winnings) on their Schedule C.

Here is the list of bad states for gamblers with the reasons why:

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [1] [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, OH, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers. Because of the rescinding of the law allowing gambling losses as a deduction, Ohioans cannot deduct gambling losses on their state, city, or school district returns.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Great post! Assuming this is accurate (and I've no reason to think it's not), this should really be an article or otherwise saved, not the end of a thread that will fall off the grid sometime soon.

Quote: beachbumbabs

Great post! Assuming this is accurate (and I've no reason to think it's not), this should really be an article or otherwise saved, not the end of a thread that will fall off the grid sometime soon.

I was thinking the same thing and was about to save his post to my hard drive. Excellent post, thank you to Indy70,

All you have to do is finish your session a winner, and don't sign any tax forms.

Quote: Indy70

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

I thought all gambling was illegal in Hawaii?
Seems odd to tax something that's not legal.

Quote: prozema

I thought all gambling was illegal in Hawaii?
Seems odd to tax something that's not legal.

If you live or work in Hawaii, you're subject to this tax, though some don't have to pay it (like me: I was legally TDY - temporary duty- there, so they took it each year,.and I got it refunded each year. My job didn't qualify for it, but I was considered a legal resident for tax withholding purposes.

Even if you can't gamble in Hawaii (and you can't, legally, but there are big games underground), if you LIVE there, it depends on your profession whether you're taxed on this demand. I guess professional gambler is one that is.

Quote: beachbumbabs

If you live or work in Hawaii, you're subject to this tax, though some don't have to pay it (like me: I was legally TDY - temporary duty- there, so they took it each year,.and I got it refunded each year. My job didn't qualify for it, but I was considered a legal resident for tax withholding purposes.

Even if you can't gamble in Hawaii (and you can't, legally, but there are big games underground), if you LIVE there, it depends on your profession whether you're taxed on this demand. I guess professional gambler is one that is.

Sheesh... I think we need an exception to personal insult rules if directed twords legislators.

Quote: Indy70

I believe this is incorrect, in Ohio you have to use AGI from federal. No deductions for losses. Also each city that the casino is registered in gets their cut of taxes on all jackpots. No recourse.

When Ohio legalized casino gambling in 2010, they also added a deduction for gambling losses effective January 1, 2013. Taxdood reported that the new budget signed into law repeals this deduction. He believes it’s retroactive; I can confirm that it is retroactive. This is bad news for amateur Ohio gamblers, but will have no impact for professional gamblers; professional gamblers can take gambling losses (up to the amount of their winnings) on their Schedule C.

Here is the list of bad states for gamblers with the reasons why:

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [1] [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, OH, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers. Because of the rescinding of the law allowing gambling losses as a deduction, Ohioans cannot deduct gambling losses on their state, city, or school district returns.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Add NC under category 1.

Democrat politicians think all the money is theirs to begin with to pay for pet projects to buy votes. Anything you get to keep after that is simply out of the kindness of their heart.

I have several hundred thousand in w2g’s from last year from about 8 different states. I paid estimated taxes and filed an extension. If I can’t write off my losses, I will be broke.

Quote: Sandybestdog

Democrat politicians think all the money is theirs to begin with to pay for pet projects to buy votes. Anything you get to keep after that is simply out of the kindness of their heart.

I have several hundred thousand in w2g’s from last year from about 8 different states. I paid estimated taxes and filed an extension. If I can’t write off my losses, I will be broke.

Not sure why you wouldn't be able to write off losses. After the first 24k worth of W2g's and losses you meet the standard deduction qualifications, I think. Maybe not?

I always thought it was interesting that casinos issue w-2's and not 1099s when you hit a jackpot. Seems backwards...

W2s imply employment.
1099s imply independent income.

I guess I just assigned myself a Google search.

Quote: sabre

If Gray is too stupid to know the meaning of "loophole", how did he get elected?

It says more about the voters of California than it does about him