The new healthcare legislation contains plenty of taxes. One especially bad one is a new 3.8% tax on unearned income above $200,000. This will have a very bad impact on amateur gamblers.
When I last looked at the bill, the tax was 2.9%. In the “final” version of the bill, it’s up to 3.8%. Let’s take a hypothetical gambler, Joe Student. Mr. Student has $500,000 of winning sessions and $495,000 of losing sessions. After his standard deduction and exemption he owes no tax.
But not in the near future. He’ll owe 3.8% on $300,000 of mostly phantom income, or $11,400. What will Joe Student do? He’ll cheat on his taxes, of course. Pay $6,400 more than what he made on his income—you must be kidding! But that’s exactly what the legislation dictates.
This legislation is bad in many ways, but from a tax standpoint it’s a disaster. Unfortunately, I don’t have the time right now to read the bill and find out what other nuggets are in the legislation; I’m forced to rely on others such as Keith Hennessey. Luckily, Mr. Hennessey and others do have the time to review legislation that remains unpopular, unworkable, and insane.
Nitpicky correction:
“Mr. Student has $500,000 of winning sessions and $495,000 of losing sessions. After his standard deduction and exemption he owes no tax.”
Mr. Student was never getting a standard deduction, since his $495,000 in amateur losing gambling sessions compel him to itemize.
Nonetheless the point still applies and is very clear, thanks for bringing it to the attention of your readers.
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