For nearly four decades, fans of the slot machines have been paying taxes only on winnings that equate to $1,200 or more. But now, thanks to a new proposal by the Internal Revenue Service (IRS), the threshold for taxable casino winnings could be cut in half.
The IRS is proposing that casino winnings should be taxed if they meet or exceed $600. If adopted into law, players of slot machines are the most likely to be affected by the proposed tax modification due to the prevalence of those gambling devices throughout that nation’s casinos. Other gambling activities included in the suggested reduction include bingo and keno.
Prior to 1977, individual states imposed variable taxes on gambling winnings, some based on the odds of a game being greater than 300:1. In 1977, the US government laid out a universal framework for gambling taxation that set slot machines and bingo to $1,200, with keno winnings set a bit higher at $1,500. Under the newly proposed IRS rules, winnings of $600+ would become taxable.
In defense of the IRS’s plan, the US Government’s daily journal, The Federal Register, explained, “There have been significant changes in gaming industry technology since ”. The description goes on to detail changes in taxation and modern technology, including the ability to electronically track casino winnings via players’ club cards, and electronic filing of taxes.
“Accordingly,” continued the Federal Register, “the Treasury Department and the IRS think the regulations for reporting winnings from bingo, keno and slot machine play need to be updated in light of these developments and that there are opportunities to reduce burden and simplify reporting.”
As is the norm in Washington D.C., the taxable winnings threshold proposal will undergo a 90-day comment period in which the public is invited to share their (preferably educated) opinions on the matter. That deadline for comments is June 2, 2015, with a hearing to be held two weeks later on June 17.
Alteration to Slot Machines Taxation Good for Government, Bad for Casinos
Gaming analyst Alex Bumazhnay of Fitch Ratings Service said, “It’s not a good thing for casinos, but it’s hard to quantify it.” He explained that a lot more players of the slot machines are going to be hit by the tax if it’s approved. Bumazhny called $600 “everyday ups and downs of winnings, not necessarily jackpot numbers”, and believes that, “a player playing a decent amount of money could hit it quite a bit.”
Eric Schippers is the Senior VP of Public Affairs for Penn National Gaming, Inc., a casino company that operates more than 30 casinos across 18 states. “It was a complete surprise,” said Schippers, who believes the threshold for taxable winnings on slot machines should be sliding in the opposite direction. “The withholding threshold of $1,200 is over a decade old and if anything, there should be some consideration of raising the threshold given inflation, not reducing it.”
Aside from seeking new ways to increase government revenue, Geoff Freeman, President and CEO of the American Gaming Association, says he has no clue where the IRS came up with such an idea. Like Schippers, Freeman agrees that winnings on slot machines and other electronic gambling activities should only be taxed if they exceed a higher amount, “closer to $4,600 as opposed to $600.”