Republicans' surprise gambling tax rolls the dice on young men

Politicians don’t typically spend a lot of time talking about the needs of professional gamblers. But they are now - and their fight over a little-known provision in the One Big Beautiful Bill Act that will hit high rollers with a new tax penalty is worth watching because it’s exposing the many tensions within MAGA.

There are the socially conservative Republicans who don’t like gambling. The libertarian Republicans who don’t care. The Republicans who say they are for the working class, including casino workers. The business-friendly Republicans who see an opportunity in an industry that made $72 billion in revenue last year, according to the American Gaming Association. And then there’s President Donald Trump, a former casino owner who pals around with current casino owners who shower him with campaign donations.

All of these factions are represented in what’s likely to become a months-long campaign to undo a provision in the $3.8 trillion tax-and-spending law. In particular, there could be serious economic implications for Nevada, a swing state that depends heavily on gambling for tourism and tax revenue.

There is a real concern that professional players, in particular, will abandon casinos and instead turn to unregulated online casinos to avoid being taxed. A decline in IRL gambling could, in turn, harm the hospitality industry and its many maids and bartenders who often struggle to make ends meet.

Historically, gambling losses have been 100% deductible. So, someone who wins $100,000, but also loses $100,000 could deduct $100,000 in losses, and would not owe any taxes. But starting next year, when the new provision of the $3.8 trillion tax-and-spending law kicks in, gambling losses will only be 90% deductible. So, someone who wins $100,000 and then loses $100,000 would still owe taxes on $10,000 of “income.”

“They’d literally be paying taxes on money they don't have,” Democratic Senator Catherine Cortez Masto of Nevada lamented to her colleagues on Capitol Hill. “This makes no sense.”

A number of Republicans agree with her. In fact, many apparently weren’t even aware the provision was in the bill until they had already approved it - and Trump had signed it into law.

“I don’t know anything about it,” Senator John Cornyn of Texas told reporters last week. “I’m not sure what it does.”

“I was so focused on Medicaid, I wasn't looking for other reasons to be against the bill,” said Senator Thom Tillis of North Carolina, who sits on the Finance Committee. “But that would be another one.”

“If you’re asking me how it got in there, no, I don’t know,” added Senator Charles Grassley of Iowa, who also sits on the Finance Committee.

By now, all three should know that fingers are being pointed at their Republican colleague, Senator Mike Crapo of Idaho, who chairs of the Finance Committee and was one of the chief architects of the One Big Beautiful Bill Act.

A staunch conservative, he’s also Mormon. The Church of Jesus Christ of Latter-Day Saints is opposed to gambling in any form. And Crapo has been a critic of gambling since serving in the Idaho State Legislature in the 1980s and 1990s, and he played a significant role in drafting a state constitutional amendment prohibiting most forms of casino-style gambling. Idaho, which has the highest share of Mormon residents after Utah, still has some of the strictest gambling restrictions in the US.

Crapo hasn’t said much about the One Big Beautiful Bill Act since Trump signed it on July 4, so it remains unclear what drove his decision to add the provision - ideology or fiscal demands to help pay for Trump’s tax cuts. But according to the Congressional Budget Office, the new provision will generate roughly $1.1 billion in revenue over eight years.

Belatedly, Republicans also have argued that it was a procedural change needed for the reconciliation process, which allowed the party to slap together and pass the behemoth tax-and-spending law without help from Democrats.

Regardless, the situation has pitted Republicans squarely against public opinion, which is mostly supportive of gambling, and the change to the tax code could antagonize some of the party’s newest supporters.

Numerous polls show that it’s mostly men who are participating in online gambling and sports betting - the fastest-growing segments in a fast-growing industry. Trump, of course, made major inroads with men in the last election, with a shift of 12 percentage points among those ages 18 to 29, compared to 2020.

For Republicans, hanging onto to power means hanging onto men as part of their MAGA coalition. And yet, the party has so far rebuffed attempts to repeal what is essentially a sin tax on a popular male hobby.

Last week, Senator Todd Young, Republican of Indiana, blocked Cortez Masto’s attempt to do so. In exchange for his vote, he wanted to add an amendment that would create an exemption to the university endowment tax for religious schools (notably Notre Dame). “I strongly support the underlying bill,” Young said from the Senate floor, “but will have to object unless you can agree to my request.” The legislation is now inching along in committee.

Meanwhile, in the House, Nevada Representative Dina Titus, a Democrat whose district includes the Las Vegas Strip, also has introduced similar legislation.

Ultimately, though, Democrats are bystanders to what is shaping up to be a political stress test for MAGA. It always has been an unwieldy coalition of alliances built on short-term conveniences and the singularly unifying figure of Trump. But as the fight over the gambling tax makes clear, in some ways, it’s a house of cards.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Erika D. Smith is a politics and policy columnist for Bloomberg Opinion. She is a former Los Angeles Times columnist and Sacramento Bee editorial board member.