Gambling provision in Trump’s megabill is primed to hurt Nevada’s economy

Ripple effects mean a gambling tax provision in the One Big Beautiful Bill Act will damage not just professional gamblers but the larger Nevada economy. (Photo by Ethan Miller/Getty Images)

A provision of President Donald Trump’s One Big Beautiful Bill Act that caps the federal tax deduction for gambling losses at 90% will be costly for gamblers and the Nevada economy, but a potential boon to the illegal betting industry, say experts who joined U.S. Rep. Dina Titus (D-NV) Monday in Las Vegas to discuss her effort to restore the full deduction.

Under current law, gamblers can deduct up to 100% of their losses against their winnings. But under the new law, even a gambler who breaks even would end up with a tax liability. 

A bettor who wins $100,000 in a year and then loses it would owe taxes on $10,000. 

The town hall coincided with the opening of Bet Bash, an annual gathering of gamblers at Circa in downtown Las Vegas, just blocks from the panel at Las Vegas City Hall. 

“I’m a 28-year old from New Jersey. I wagered $10 million myself last year with a 4% edge,” an unidentified man told the panel, adding that under the new law he’d be “paying taxes on a million dollars despite winning $400,000.” 

In a 37% tax bracket, the levy amounts to $370,000, resulting in a net profit for the year of $30,000. 

The cap applies to recreational and professional gamblers, who report their winnings and losses as business income and expenses on Schedule C, according to tax experts. Pros can also deduct business expenses such as travel and tournament entry fees 

“If you’re professional, you get self-employment tax on top of that,” said Russell Fox, a local tax professional and member of the panel. 

The new law is expected to cut into gambling action across the board, but is especially problematic for professionals, according to Adam Robinson of American Bettors’ Voice, an organization representing the interests of domestic gamblers. 

“If you’re pulling anywhere from 3% to 8% a year on the total amount of money you’ve wagered, in terms of the professional profitability bell curve, you’re probably in pretty good shape,” Robinson said, adding that under Trump’s tax provision, “if you’re not beating the market by 11% or more, it doesn’t make financial sense.” 

The hold (the amount of money a betting operation retains from wagers) in Nevada sports books is currently, on average, about 5% to 6%, up from lower percentages in previous years.  

DraftKings, which enjoyed record revenue in the second quarter of this year, announced its hold for the quarter “exceeded 11.5%,” up from 9.5% in the first quarter. 

The site is known, as are casino sports books, to limit the play of some savvy bettors. 

DraftKings did not immediately respond to a request for comment. 

In a recent interview, DraftKings CEO Jason Robins said the cap on gambling deductions “doesn’t make sense. If you can’t deduct all your losses, you know, how does that make sense that you pay income tax on something that’s not actually income.”

“It’s not just an accounting quirk,” said Robinson with American Bettors’ Voice. “It’s a policy with massive unintended consequences.” Among them, he says, is damage to Nevada’s economy.

“High Volume VIP play and professional play is the backbone of casino handle in sports betting liquidity. If it’s no longer financially viable to bet recreationally or professionally, those players are going to take their action elsewhere,” Robinson said. “That means fewer trips, fewer hotel nights, fewer restaurant visits, fewer tips, fewer jobs.”

Gov. Joe Lombardo, a Republican who endorsed and was endorsed by Trump, did not respond when asked if he’s reached out to the president about the policy’s impact to the state’s economy. 

The policy will also undercut the gambling tax base developing in other states, Robinson asserts. “I’m from Illinois. I can tell you emphatically that they’re leaning on gaming for tax revenue. If the big players leave, state revenues will drop across the board.”

Lawmakers will respond, he says, by raising taxes on operators, who will “respond with worse odds, higher fees, fewer promotions.” 

Players, he says “aren’t dumb. They understand the tax implications of what’s happening here, and they know if they’ll be taxed unfairly at regulated books, they’ll just move their action to offshore sites, or they’ll go back to their local book, or they’ll look to emerging prediction markets.”

The congressional Joint Committee on Taxation (JCT) projects the measure will raise roughly $1.1 billion over ten years.

“I don’t think you can raise $1 billion, because if you make people pay taxes on fake money, they’re not going to deduct it or report it or even gamble here,” Titus suggested. “They’ll go offshore or to the black market.” 

Titus is sponsoring the FAIR BET (Fair Accounting for Income Realized from Betting Earnings Taxation) Act, to restore the full deduction. “It’s not partisan. We’ve got some Republicans who are co-sponsors. It’s not ideological. It’s just not fair tax policy.” 

GOP, Dems agree Las Vegas is the perfect place to discuss ‘big’ bill, but for very different reasons

Titus noted that Rep. Jason Smith of Missouri, the Republican chairman of the House Ways and Means Committee, while at a field hearing in Las Vegas last month, admitted the policy “needed to be fixed. It’s kind of like the arsonist saying, ‘let me help you put the fire out.’” 

Tourism and hospitality generate more than a third of Nevada’s gross domestic product, account for 28% of the state’s employment, and 22% of wages earned.

Titus noted gambling is in every state with the exceptions of Hawaii and Utah. “But members of Congress don’t really understand all the complications of gaming, because it’s not as big a deal in their district as it is here.” 

Ripple effect

The cap on the gambling loss deduction, scheduled to go into effect next year, comes as Americans face increased costs from tariffs, cuts to federal food, energy, and education assistance, and the elimination of coverage for millions who receive Medicaid, Titus noted.  

“It’s a perfect storm, and Nevada is always kind of the canary in the coal mine,” she said. “The economy is hit hardest here, and it takes us longer to recover. People have to have a little money in their pocket to go on holiday, and if they’re hurting around the country, we’re going to feel it.”

Visitation to Southern Nevada was off 11.3% in June compared with last year, according to the Las Vegas Convention and Visitors Authority. 

“We’re the only state that I’m aware of that can actually lay claim to the fact that the gambling industry is our main industry driver,” former Nevada Gaming Control Board chairwoman Becky Harris said, adding she’s “frankly surprised that gambling caught the attention of somebody to have them want to mess with the tax policy.” 

Nevada Resort Association President and CEO Virginia Valentine noted that how the new law will affect player behavior remains to be seen, but warned even the perception of a lack of fairness “is probably enough” to turn off some customers. 

“The proposition when you walk into the casino is that you’re going to play your money, the game’s going to be fair, and at the end of the day, you’re going to be taxed fairly,” she said.

Harris observed that even stock market losses are deductible. She wondered what’s next from the feds. 

“What is the federal government going to come in and fiddle with next that’s going to be to everybody’s disadvantage?” she asked. “Why are you inserting yourself into my jurisdiction? Why are you trying to dictate policy?”

Harris noted that Nevada sports books were once “almost taxed out of existence” by the federal government.

In 1951, two decades after Nevada legalized gambling, the feds imposed a 10% tax on sportsbooks in response to opposition. The effort put some books out of business and drove others underground. The tax came down to 2% in 1974. Today, sports books pay a federal excise tax of 0.25% on each wager.  

“I remember a quote from the late Paul Volker, who was a chair of the Federal Reserve,” said Fox, the tax accountant. ‘Whatever you tax, you get less of.’”