As part of Donald Trump’s Big Beautiful Bill, Republicans in the U.S. Senate snuck in a change in the federal income tax laws to get a couple of billion dollars from professional and other high-stakes gamblers over the next ten years.  A billion dollars sound like a lot – that’s a thousand millions.  But it’s a rounding error compared to the trillions of dollars – that’s thousands of billions – in tax breaks for their billionaire big donors, like Elon Musk.

It is not even clear that the new rules will raise any money.  Total federal income taxes on individuals will go up, because winning, and even losing, gamblers will have to pay taxes on phantom winnings, money they no longer have.  The law will soon allow winners to deduct only 90% for losing bets, even if they lost much more than they won.  And unlike all other businesses, professional gamblers will not be allowed to deduct all their business expenses; pros’ deductions for expenses will be lumped in with their gambling losses and limited to 90% of the amount they won, no matter how much they spent.

But the federal government now makes a few billion dollars every year from the special excise taxes on wagers, such as the 0.25% tax legal bookies are required to pay on every sports bet.  Professionals and high-rollers are the main source of this tax revenue.  These bettors are already taking their action overseas, where winnings are not reported to the IRS and sports books don’t pay the excise tax.

It is not only America’s licensed sports books that will be hit by big bettors going abroad.  U.S. poker rooms will see fewer tournaments, because they must report everyone who wins more than $5,000.  A $10,000 winner will only be allowed to deduct $9,000 in all other gambling losses for the year, even if the $5,000 is long gone, buried by other gambling losses totaling more than $10,000.  And if the winner is a pro, he can only deduct up to $9,000 for all other gambling losses and all necessary business expenses combined.

Everyone who wins a bingo jackpot of $1,200 or more is reported to the IRS, as are Keno winners of $1,500 or more, and lottery winner of at least $5,000.

The hardest hit will be high-limit slot machine parlors.  When these close, casinos will make less profits and pay less taxes.  Thousands of players like playing slots for $5 a line or with $500 platinum coins.  When the device pays $1,200 or more casinos must demand I.D.s and report the win on W-2Gs.  How long will these high-rollers keep playing when all their big wins are reported to the IRS and they can only deduct losses up to 90% of the amounts won.  Win a reported million dollars over the course of a year and you must pay taxes on $100,000 in phantom winnings, even if you lost more than a million.

The Democratic members of Congress from states with big casinos, like Nevada, finally woke up to what Trump’s Big Beautiful Bill would do to their home industry.  Even a few Republicans, including Guy Reschenthaler (R-PA), Co-Chair with Congresswoman Dina Titus (D-NV) of the Congressional Gaming Caucus, introduced a bill to undo the damage.  Kind of.  Their cutely named “Shifting Limits on Thresholds” (“SLOT”) Act would do nothing to help gamblers, but it might save high-limit slot parlors.  It would raise the reporting threshold for slot machine winnings to $5,000 and index it to inflation.  But the right-wing religious extremists who control Congress think gambling is a sin, plus they would never do anything that might offend Trump.  The SLOT Act can’t even get a hearing in the Republican controlled Ways and Means Committee.

Representative Titus tried again, with the almost as cutely named “Fair Accounting for Income Realized from Betting Earnings Taxation” (“FAIR BET”) Act.  This one would reverse the 90% limit.  Surprisingly, it did get some Republican co-sponsors; but of course, it can’t get out of committee.

The casino industry’s lobbying group, the American Gaming Association, did make a weak effort to stop Trump and his MAGA Republicans, but only, again, to protect casinos’ high-limit slots.  And they think they won, though they didn’t.

One of the tax codes’ worst provisions is § 6041(a), which requires anyone who pays more than $600 a year for services to report the payments to the IRS by sending a copy of the notorious 1099-MISC to the service provider.  Have a housekeeper or gardener that you pay more than $600 over the course of an entire year?  You are required to file a 1099-MISC.

The Big Beautiful Bill raised that to $2,000, undoubtedly to help wealthy homeowners who have lots of servants making more than $50 a month.

The AGA issued a press release claiming they had got the amount raised, for slot machine winners.  The only problem is that the reporting of gambling winnings is covered by a completely different section of the tax code, § 3402(q), which even uses a different tax form, the W-2G not 1099-MISC.

There are some poker rooms that have been issuing 1099-MISCs to winners who cash in more than $600 in chips.  They probably shouldn’t have been doing that.  But at least now they will only be incorrectly reporting poker winners who walk away with more than $2,000.

Why should we care about all these complicated rules?  Americans are supposed to report all their income of any kind.  But even the IRS knows that gamblers do not voluntarily report winnings.  So, it turns the casino, poker room, sports book, etc., into government tax collectors, the same as with sales taxes.

The IRS has excellent computers.  So, if you receive a W-2G or a 1099 you can be sure the IRS will know about your winnings.

Interestingly, sports bettors will not often get one of these forms.  There are some sports books, like the few poker rooms, who issue 1099-MISCs to any gambler who wins more than $600.  But the rule says that winning at a sports book or racetrack is only reported if the payment is at least 300 times the amount bet.

Although gaming operators are required to report certain winning bets, there is no requirement for reporting losses.  The only legal way to get around the stupid new 90% law is to keep detailed records of all your bets, wins and losses and expenses, to prove you lost 90% of the total won.

Of course, if the Democrats win the next few national elections, the ridiculous 90% rule will be repealed.

But I, personally, would not bet that Donald Trump will accept the result of any election which Republicans lose.