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A controversial gambling tax change quietly inserted into former President Donald Trump’s sweeping economic legislation is now facing bipartisan scrutiny as Republican lawmakers respond to backlash from the betting industry and professional gamblers.
The provision, which was part of the “One Big Beautiful Bill” signed into law on July 4, reduces the deduction for wagering losses from 100% to 90% starting in 2026. Critics argue the change could unfairly force gamblers to pay taxes on money they never actually earned.
What the Law Does:
Currently, gamblers can deduct their wagering losses up to the amount of their winnings, paying tax only on net income. Under the new rule, only 90% of those losses will be deductible, potentially creating tax liabilities even for break-even or losing years.
For example, a gambler who wins and loses $100,000 in the same year would now be taxed on $10,000 in phantom income under the new policy.
Industry Reaction: “Catastrophic” for High-Volume Gamblers
“This would be potentially catastrophic for the industry,” said Jack Andrews, a well-known professional sports bettor. “High-volume players are the lifeblood of most casinos. If they know they can lose money and still owe taxes, they’ll stop playing — or play off the books.”
Republicans Backtrack: “It Was a Mistake”
Rep. Jason Smith (R-Mo.), chair of the House Ways and Means Committee, disavowed the change, calling it a Senate mistake:
“It was definitely not something that we did in the House… I’m interested in making sure that we fix the Senate’s mistake.”
Sen. Ted Cruz (R-Texas), who admitted to missing the provision before voting for the bill, is co-sponsoring a repeal alongside Sen. Bill Hagerty (R-Tenn.) and Nevada’s two Democratic senators, Jacky Rosen and Catherine Cortez Masto. The repeal bill is called the FULL HOUSE Act (Facilitating Useful Loss Limitations to Help Our Unique Service Economy).
“It makes no sense,” said Cruz, an avid poker player. “You’re taxing people not on actual income — and that violates the spirit of the income tax.”
Sen. Mike Crapo (R-Idaho), who led the Senate Finance Committee during the bill’s drafting, said he’s open to hearing feedback but defended the inclusion:
“To comply with reconciliation rules, every provision needed to show a budgetary effect. This change was made to keep the provision within the bill.”
The Congressional Budget Office estimates the gambling deduction cap will raise $1.1 billion over 10 years.
Pushback in the Senate
On July 10, Sen. Cortez Masto attempted to pass the FULL HOUSE Act via unanimous consent, but Sen. Todd Young (R-Ind.) objected, halting its progress. Senate Majority Leader John Thune (R-S.D.) has since dismissed the possibility of rolling back any part of the bill, including the gambling tax and controversial Medicaid cuts.
“Not everybody got everything they wanted,” Thune said. “It’s historic in its breadth and the things it addresses.”
What’s Next?
With the 2026 tax year looming, industry advocates warn the real impact won’t be felt until early 2027, when taxpayers begin filing under the new rules.
But for now, momentum to repeal the tax provision is growing — even if Republican leadership remains noncommittal.
“Why do so many people care about the gamblers tax?” asked Sen. John Cornyn (R-Texas). “I’m kind of agnostic… but happy to look at anything they propose.”
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