Gambling Wins vs Loses: The North Carolina Dilemma
North Carolina Weighs Taxing Income from Total Gambling Winnings
In the realm of gambling, luck swings both ways. However, the state of North Carolina seems to take a harsh stance, taxing gamblers on their gross winnings, even if those winnings are offset by losses. This means a gambler who wins and loses an equal amount still pays tax on their winnings - a penalty they might not incur at the federal level.
The current state income tax rate in North Carolina stands at 4.5%. Take, for example, a gambler who wins $20,000 but loses $30,000. They'd owe nothing to the federal government, given their net loss of $10,000. Yet, they'd still be required to pay taxes to North Carolina on their $20,000 in winnings.
A local tax and accounting expert, Kidwell, shared an anecdote of an unnamed client who ends up paying taxes on money they never had due to this tax law. This client wins and loses about $300,000 each year from casino gambling. Despite this, they're taxed a hefty $20,000 on their winnings.
Taxing Gamblers Fairly: A State Bill
To rectify the gaping disadvantage in taxation, Kidwell teamed up with state Rep. Erin Pare, R-Wake, to propose a bill that aims to tax gamblers on their net gambling income rather than gross income. If passed, the bill will extend to sports betting losses, casino losses, and expenditures on lottery tickets.
However, despite the bill gaining bipartisan support, it's facing resistance. This resistance can be attributed to the state's reliance on the tax revenue generated from gross gambling income. In 2024 alone, North Carolina collected $50m off sports betting. Furthermore, some social conservatives argue that the bill serves as a backdoor method to subsidize gambling habits.
Views from Opponents and Supporters
Rev. Mark Creech, a long-standing opposer of gambling-centric bills, voiced his concerns about the proposed bill. He worries that allowing tax deductions for gambling losses would alleviate the immediate financial impact of losses, indirectly supporting the gambling industry's negative social consequences.
On the other hand, James Joyce, an avid sports gambler from Holly Springs, voiced his support for the bill. He finds it tough enough to beat the odds without having to pay additional taxes when he wins.
As for the proposed increase in the sports betting tax rate from 18% to 36%, it's currently being discussed in the North Carolina Senate's budget proposal [1][3][5]. Additionally, there's a bill to regulate video gaming terminals, but it does not mention taxing gamblers on net income [2][4]. To find specific details about the proposed bill on net taxation, one might need to look into legislative databases or follow updates on North Carolina's legislative sessions.
- The current taxation of gamblers on their gross winnings in North Carolina has sparked a controversy, with some arguing that it's only fair to tax them on their net income, taking into account their losses.
- Erin Pare, a North Carolina state representative, has teamed up with a tax and accounting expert to propose a bill that would implement taxation based on net income for gamblers, including those who engage in sports betting, casino gambling, and lottery ticket purchases.
- While the bill has garnered bipartisan support, it is facing opposition due to the state's reliance on the revenue generated from gross gambling income and concerns that it could indirectly subsidize gambling habits.
- Opponents of the bill, such as Rev. Mark Creech, argue that allowing tax deductions for gambling losses could support the gambling industry's negative social consequences, while supporters, like James Joyce, find the current taxation system unfair and challenging for gamblers.
