As American taxpayers sift through the details of the nearly 900-page domestic policy law that President Trump signed this month, it has become clear that the nation’s gamblers are among the biggest losers.
A measure that Republican lawmakers tucked into the bill late in the legislative game altered the tax code in such a way that bettors who break even could still end up owing money to the Internal Revenue Service. The change created a new type of “phantom” income and has led to backlash from professional gamblers and within the gambling industry, which argues that the tax increase will hurt the hospitality sector in states like Nevada.
The outcries over the new gambling tax that was added to the Senate version of the law reflect the last-minute machinations that took place as Republicans raced to finalize the One Big Beautiful Bill and deliver it to Mr. Trump by July 4.
Gambling losses were traditionally fully deductible, so gamblers who broke even in a year would not owe any taxes. But under the new tax law losses are only 90 percent deductible, meaning that if a gambler won $100,000 and then lost $100,000, he could still owe tax on $10,000 of income.
To those who consider themselves professional gamblers, whether they bet on casino games like poker or sporting events, the change could alter the calculus over how much to bet and where.
“This new amendment to the One Big Beautiful Bill Act would end professional gambling in the US and hurt casual gamblers, too,” Phil Galfond, a professional poker player, wrote on social media. “You could pay more in tax than you won.”
Many Republicans have said they were not even aware how the tax change got into the bill, and this week Democrats from Nevada tried without success to belatedly reverse it.
“If you’re asking me how it got in there, no I don’t know,” Senator Charles E. Grassley, an Iowa Republican who sits on the Finance Committee, told reporters last week.
A tax increase that affects a swing state such as Nevada could be a political problem for Republicans.
Mr. Trump, who once owned casinos in Atlantic City, made eliminating taxes on tips a hallmark of his presidential campaign. If the casino industry is squeezed by higher taxes on gamblers, then bellhops, bartenders and waiters could also come under pressure.
The White House did not respond to a request for comment.
The gambling industry was aware of potential changes to gambling deductions as the legislation was being written this spring, but did not mount a fierce resistance as it pushed for other measures such as a higher threshold for reporting slot machine winnings.
The tax change to the deduction is estimated to raise $1.1 billion over a decade and was included to help lower the overall cost of the legislation, which is expected to add more than $3 trillion to deficits.
Mr. Galfond argued that the legislation would not raise the revenue lawmakers think it would because gamblers would either scale back their betting or seek offshore options to avoid taxation. His viral posts were part of an online frenzy of opposition that caught even the gambling industry’s lobbyists off guard.
The American Gaming Association is now hoping that lawmakers can agree to reverse the tax change. Dara Cohen, a spokeswoman for the association, said the industry was backing legislation that would “restore the longstanding tax treatment of gaming losses.”
Any fix would most likely happen in another budget bill or a piece of “technical corrections” legislation. That does not appear imminent.
A last-ditch attempt by Senator Catherine Cortez Masto, Democrat of Nevada, to amend the measure last Thursday was derailed by Republicans.
“This makes no sense, and it will do irreparable harm to our country’s gaming industry if it takes effect,” Ms. Cortez Masto said on the Senate floor. “It will move major events that drive our economy offshore and push wagering into illegal markets.”
The deduction is generally used by high rollers who itemize deductions on their tax returns. Such gamblers, who consider themselves to be professional, can also deduct expenses related to traveling to casinos and lodging. The gambling industry estimates that about 700,000 taxpayers claim the gambling deduction.
Andrew Lautz, the director of tax policy at the Bipartisan Policy Center, said that there were questions of fairness about the change to the deduction and that Republicans essentially enacted a “sin” tax on gambling by treating betting losses different from other investment losses. While the $1.1 billion tax hit is relatively small as a share of the overall legislation, it is significant to the gambling industry and to states that rely on gambling for tax and tourism revenue.
“It’s a big engine for Nevada,” Mr. Lautz said of gambling. “And $1.1 billion is not a drop in the bucket for the gaming industry.”
The industry has already been bracing for higher taxes as states look to betting as a way to balance their budgets.
The Sports Betting Alliance last month condemned legislation enacted by lawmakers in Illinois that imposes new taxes on each bet that is placed online.
“We will continue to fight this discriminatory tax alongside our customers — both right now in Illinois and in any state that considers these harmful tax changes in the future,” the group wrote, warning that bettors could switch to illicit sports betting venues.
The rise of digital gambling channels has stunted casino revenues in recent years, and the reduction of the gambling loss deduction could compound casinos’ financial challenges.
Joe Weinert, the executive vice president of the Spectrum Gaming Group, said there would be a “shakeout period” for casinos as big gamblers reconsidered the stakes of continuing to play. However, he expects that casinos could suffer if gamblers switch to unregulated corners of the industry.
“From a gambler’s perspective, this is a raw deal,” said Mr. Weinert, who has been analyzing the gambling industry since 1996.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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