Hey folks. If you are settling in for a breakdown of the various positions of the newly elected Congressmen regarding online gambling, you’ve come to the wrong place. If you are looking for in depth political commentary, you are looking in the wrong place. If you wish to engage in political discourse, where you and I can both choose opposing political parties and repeat what we’ve watched on MSNBC or Fox News, well, move on, buddy. I got nothing for you. But I did have an isolated thought. If the mid-term elections slows the legalization of online poker, well, BONUS!
I’ve made the point before and I will make it again: Legalization and Regulation of Online Poker will be disastrous. DISASTROUS! Why? Taxes, people.
To be clear, I pay all of my taxes, so this does not really apply to me as much as it does some other players. However, I would venture to guess that the majority of leisure players do not pay taxes on their online gambling winnings. If a law is passed legalizing and regulating online poker, you better believe that the government will insist on access to the win/loss statements of all players by the end of the year. After all, a lot of pro-online poker organizations are touting online poker as a revenue generator. Why wouldn’t the government insist on access to win/loss statements to assist in the collection of taxes from net winners.
So, you won $100! Good for you. Now give Uncle Sam $40. Not so good anymore, is it?
Oh, that’s just the tip of the iceberg. I could easily see current operators or former operators who are seeking licensure providing information about past wins/losses for US players. Why not? The sites likely have the data and the government can easily use it to determine that the big players (or maybe even the little guys) who failed to pay the taxes on their 2008 WSOP satellite win get hit with an audit and federal tax evasion charges.
Even if that scenario is far-fetched, we can all agree that the online poker room providers will have to pay taxes, and those added costs will be passed onto us, the players.
I don’t care how you look at it. The legalization of online poker will likely result in higher rake and increased incidents whereby a player is forced to pay taxes on their wins. How shitty will it feel when you win that tournament you’ve been fighting against for years, only for it to be the week after poker is legalized. Suddenly, your big payday is cut in half…all so that poker, already accessible to the masses, can be “legalized.”
So, I’m no Republican. I’m no Democrat. Hell, I think they all play for the same team. But I am more than happy if the midterm elections derail any legalization of online poker. Legalization may mean more fish, but it’ll also mean more money to get to the fish, and a hefty tax requiring you to share your fish with the government.
Until next time, keep mine illegal poker!
November 4th, 2010 - 8:35 pm
All true except for one small fly in the ointment. Will online poker stay “accessible? These are the same idiots responsible for the UIGEA remember. You probably play the Big 2 online, Stars and Tilt, where the effects of it weren’t as readily felt. I play a couple of online leagues where smaller rooms were more prevelent just because they were willing to ante up pot sweeteners to get business. Because of their fear of the act, remember a couple of foreign citizens were arrested in Dallas while changing planes because the were associated with online gaming, a lot of these sites dropped US players. Funding options also dried up on a lot of sites, Neteller dropped US customers, a lot of credit cards stopped allowing their use and some banks stopped allowing transfers. All this was while there was still a lot of dithering going on about enforcement of the law. So while legalization might not be the be all and end all I’m not sure putting the people who are absolutely against it back in the driver seat is really going to help the situation.
November 5th, 2010 - 8:12 am
Unintended consequences are a bitch.
Rake
Death and Taxes
Fellow travelers.
November 5th, 2010 - 9:48 am
Except for one thing… if you were actually paying all your taxes, then you’d already be paying this. So those that it would affect are already breaking the law, this would just give the government the means to prove it.
There are a few options here:
- Tax on withdrawal – it’s not a winning until you take it out. If you’re using online poker as an income source, then it gets taxed as such. If it’s small-time recreational, you’ll leave your smaller winnings online to play.
- Tax on deposit – like cigarette or liquor taxes. You’re only depositing to gamble, so tax on the purchase of credit instead of the winning. It is essentially a sin tax after all.
- Allow gambling losses to be tax-deductible (not familiar enough with US tax law, but this could already be the case). Suddenly all us losing players get a benefit… think rakeback.
- Minimize taxes on online poker winnings, but tax the companies. The rake would definitely increase to cover the corporate taxes, but it would spread over a larger base of players.
Just a few possibilities, all with their own problems, but it doesn’t necessarily have to be a straight tax on winnings. What if I win $10k in a tournament, and then blow it over the next two weeks playing way above my skill level.
Oh, and who says the Republicans won’t legalize poker? Sin taxes are government’s favourite taxes, because the “righteous” aren’t effected, and those who complain are throwing their money away anyway. Watch a Congressman walk into a church and say “you have a choice, we can tax these poker players, or we can tax your church.” See where morality lies then.
November 5th, 2010 - 10:16 am
These are all valid points, and I admit that it is not black and white.
Wolf, I know there was a mass exodus of poker sites from the US and I personally have no easy way to get money online. However, if someone offered to help me get money online, but they would get 40% of my winnings, I would consider that a bad deal. I much rather stay to the two major sites and figure out how to get my money online through other means (hello Canadian friends!).
Astin, you are Canadian, so I will not argue with you, since I will likely need your help to deposit in the future. But I will suggest that there is NO INCENTIVE to the government for a tax scheme that minimizes taxes to be paid by the players. The government will likely use it as a means to “discourage” a vice, like the tax on cigarettes. They certainly wouldn’t lower the gambling tax rate to encourage more play. Likewise, they will probably require automatic reporting of big wins, similar to what happens in US live casinos. So, yeah, you might lose the $10k you won, but first you have to prove that you lost it. AND, if you don’t lose it, then you didn’t really win $10k, but more like $6k. How is that a good result?
November 5th, 2010 - 5:29 pm
Astin,
Gambling winnings are taxed as straight income and losses are deductible up to the amount of your “winnings”, which of course if you had losses equal to you winnings you really don’t have any winnings. So the most sensible way to go would be a tax on withdrawals, the same way a capital gains tax works. As long as the stock isn’t sold there is no tax and if sold for loss it can be claimed as such. As long as the money stays put, no tax. If it’s withdrawn then your cost basis, ie, deposits kick in, and any actual winnings taxed. Of course whoever said gummint is sensible.