With the advent of football season, I started reading this book again just for the heck of it, and I forgot just how good it is, FWIW, especially for basic explanations of probability concepts and calculating odds.
If you are a regular poster in the Covers.com forums who extols the virtues of “making money” with parlays and teasers, then you REALLY need to read this book.
I know this isn’t supposed to be a political blog, but this seemed relevant to IAG… and also to WTF?
Under House Bill 1495, no longer will gamblers be able to offset their winnings with their losses for Hawai’i state income tax purposes. Previously gamblers would be taxed only on their net winnings, but now they will be taxed on gross winnings.
A Hawai’i resident who wins $10,000 in a year, for example, and loses $9,000 in the same year used to be taxed only on the $1,000 in net winnings. Under the new law, that resident would be taxed on the full $10,000 in winnings.
Even if you end up a net loser, you will still be taxed on whatever you won along the way.
Dennis Kohara, a certified public accountant in Honolulu, called the law “ridiculous.”
“You sit down at the blackjack table. You win a hand. You lose the next one. You win another hand. You lose the next one,” he said.
And, under the new law, you now owe taxes on all the winning hands, which are not offset by any of the losing hands, Kohara said.
State Rep. Pono Chong, who sponsored the legislation, acknowledged that Kohara is correct.
However, Chong said, the new law will mainly affect those who have substantial winnings, along with substantial losses…
The Department of Taxation, which supported the bill, has said it’s unclear how much the law will actually bring in to the state. However, if it is assumed the gambling losses remain at the $5 million level currently claimed, the revenue gain could be $300,000 a year, the department said in testimony in support of the measure.
The new law is retroactive to January of this year.
When I first read this, my impression was more humorous than serious – how is the state of Hawaii going to enforce something as silly as taxing gross winnings? When gambling – whether legal or illegal – generally is an activity that occurs beyond the reach of tax authorities and, for most taxpayers, is something that only comes onto a tax return voluntarily, if at all?
Well, if I’m following this correctly, there are two ways you could get hit by the tax:
1.) You’re so honest that you already report all of your net gambling activity to the state and pay taxes on the net winnings because you’re that kind of guy. If you are doing this now, then you’re a moron and probably wouldn’t even notice the marginal increase in your tax bill under this bill.
2.) You’re a high enough roller – or a lucky enough normal person, say from a slot jackpot – that your payoff from the casino is large enough to require a 1099 to be issued. In that case, the Feds and the state already know about your payoff and are going to tax you on the whole amount so it only makes sense under the existing system (and the old Hawaii system) to also declare your losses and minimize that tax liability as much as you can, except now the state of Hawaii is saying that you can’t deduct the losses anymore. This is the scenario that Rep. Chong is talking about when he says it will only affect a small subset of taxpayers, because only a small subset of gamblers ever receive 1099’s from the casino.
So, let’s just ignore the morons in #1, as they’re hopeless, and focus on the people in #2, the high rollers. Well, the tax is going to disproportionately going to hurt them, because this law isn’t so much a tax on their big “winnings” as it is a service charge on their bankroll.
(Think about it intuitively: high rollers are not necessarily winners. More often than not they’re usually big losers, who, when they do win, win big. So in the context of this article, most of the people who are being referred to as “winners” based on getting big 1099-required payouts from the casino probably aren’t really winners, either – they’re just high rollers who have thrown a lot of money around and are now getting back towards even, if at all.)
So what’s a high-roller to do? Certainly he’s going to avoid situations where his bankroll gets siphoned away everytime he hits a winner, and he’ll do it in a couple of different ways: 1.) He could quit being a high-roller and just play at a level below the reporting threshhold, but where’s the fun in that? or more likely, 2.) He’ll just go gamble on the same scale as before but he’ll go somewhere where his winngs aren’t reported, whether it’s an underground game or somewhere overseas.
Either way, the state of Hawaii misses out on ALL of his gambling income, including the stuff that’s actually income, and Vegas, and anywhere else Hawaiians like to go to gamble, lose out on his action and get hurt by the new law. if I were Las Vegas, I would be pissed, especially considering that all tax jurisdictions are huring for money these days and that this kind of idea tends to spread around the bureaucrat hive once it gets introduced.
That said, my gut feeling says that somewhere along the way this law will get challened in court and that there must be some tax law precedent that defines the difference between revenue and income, of which the “winnings” we’ve described in this article are definitely the former, and all of this will be moot. I hope.
Now back to dick jokes and football.
(h/t Boortz, btw)
This post is a test, really.
