Senate Republicans in Washington blocked an effort on Thursday to reverse a lesser-known provision within their tax and spending cuts law that has raised concerns among professional gamblers about the future of their industry. Democratic Senator Catherine Cortez Masto of Nevada proposed a bill to revert the change on gambling tax deductions, but her Republican counterpart, Senator Todd Young of Indiana, objected, halting the proposal for the time being.
The brewing conflict over the gambling provision is likely just the beginning of the repercussions stemming from the recent tax law and its implications for the nation. The extensive bill, spanning over 900 pages, signed into law by President Donald Trump, contains numerous provisions altering federal programs and the tax code, with many lawmakers acknowledging they are still digesting the full extent of these changes.
Cortez Masto expressed surprise that many Republicans and Democrats were unaware of the inclusion of the gambling provision in the legislative process. Under the revised tax law, commencing in 2026, individuals can only deduct 90% of their gambling losses up to the amount of their winnings, in contrast to the prior rule allowing a full deduction of losses up to the amount won.
The modification is expected to significantly impact individuals who wager larger sums and itemize their deductions. Notably, the alteration could result in a substantial financial impact for these individuals, as exemplified by the scenario of owing taxes on winnings despite losing them all under the new deduction rule.
Professional poker player Phil Galfond voiced concerns about the provision potentially jeopardizing professional gambling in the U.S., garnering attention from media figures and lawmakers before the bill’s passage. The provision, embedded in the bill released by Senate Finance Committee Chair Mike Crapo in mid-June, emerged publicly only days before the bill’s approval, prompting criticism from various quarters.
Democratic Senator Ron Wyden criticized the rushed process which led to the inclusion of the provision, highlighting the potential repercussions for constituents. The provision is forecasted to generate over $1.1 billion in tax revenue over an eight-year period, contributing to an estimated deficit increase of nearly $3.3 trillion between 2025 and 2034, as projected by the Congressional Budget Office.
Republicans defended the provision as an essential procedural change enabled by the reconciliation process, facilitating the bill’s passage without Democratic backing. Senator Young, while supporting the policy, conditioned the reversal of the provision on Democrats’ acceptance of other provisions.
Cortez Masto’s unsuccessful attempt on Thursday is unlikely to be the final effort to address the gambling provision. The ongoing debate underscores the complexity and implications of the new tax law on various sectors, including the gambling industry.
A bill with bipartisan support that aims to restore the full gambling deduction must first pass through committee. Nevada Democratic Rep. Dina Titus has introduced a separate bill in the House seeking to revert to the previous standard.
