Fiscal Sentence: Gamblers have to pay more tax than investors

Copyright © HT Digital Streams Limit all rights reserved. Activities that less favor the economy need to be taxed more. (AP) Summary has granted that the line may be thin, but it is clear that investment helps the economy while gambling is merely consumed. Commercial activities that less benefit the economy should always be taxed more. During a recent poker game, I was sitting from a young man who played professionally online. He lost early and left, but not before he said at the table how angry he was over a tax increase that the US Congress approved last summer: Now he could only write off 90% of his losses. He was still angry when I told him that it was one of the rare tax with which I agreed. As he saw it, it was unfair. People can write off all their business or stock market losses, so why not be able to write off all his poker losses? Until this tax assessment has become legislation as part of the US, it is allowed one large, beautiful bill. As I told him, online poker is different. Speculation on stocks is still investing. Gambling is more like entertainment – consumption, to use the economic term. And just as people can’t write off the cost of a movie ticket if they don’t like the film, gamblers shouldn’t be able to write off their losses. In fact, they are lucky to be able to write off 90%. This is not to say that there is anything wrong with gambling. But should it be encouraged by the tax code in the same way as investing? The tax code encourages investment activities for a reason: it creates wealth and work and helps to expand the economy. Taxation is an essential evil. The government needs revenue and must tax all kinds of productive activities, such as work or savings. It is a good policy to charge a higher tax on activities that offer less benefit to the economy. Thus, the US taxes on investment (at a lower rate than income), but also lets people write off their losses. The idea is that if they invest and lose money, they do not have a tax liability. It encourages some healthy risks, both to start businesses and to invest in them. It is less clear why bets on a basketball game should receive the same treatment. Not only can it offer the same benefits in society, but it can actually impose society, especially if you gamble the increase in problem. Nevertheless, until the bill is approved, losses for gambling could be completely written off. If you won $ 5,000 on one bet but lost $ 5,000 on another, you would have no tax liability. Now you only have to write off $ 4,500 and pay income tax at $ 500 in profits – even if you didn’t make money on the Net. The change is a recognition of two realities: Gambling becomes a larger part of the economy and governments need more income. After the US Supreme Court gained a federal law that banned Sport Gambling in 2018, many cash -distant states opened the market. The help of this expansion was technology that made gambling possible in real time on your phone. Even in these stimulating times, politicians from both parties acknowledge that the US should tax something – and a good place to start with less productive activities. It is better to reduce the amount of gambling losses that people can write off than to increase the tax rate of capital gains. However, there is a complication: As gambling becomes a larger part of the economy, the distinction between gambling and investing becomes less clear. Some people deserve a living in this way. Professional gamblers, like that poker player, argue that the law will already push their small margins. Some can leave the field completely, which will reduce the tax revenue the government can raise. But if the benefits are indeed smarter, it might be better for the economy if they apply their talents elsewhere. It is true, many people have jobs that offer questionable economic value and can write off all their losses. But an exception for professional gamblers will create all kinds of dubious incentives for more comfortable gamblers to find a way to claim professional status. Considering the increase in problem gambling, it would be unwise. Then there is the other side of this argument: more investors behave like gamblers and can write off 100% of their losses. The incidence of trading programs made day trading popular; Robinhood is so big now, it’s in the S&P 500 index. More people bet on stocks or crypto as you can bet on a football game. But the difference between investment and gambling is not just about intent. Even day trading, although it is often not in the best interests of the trader, adds economic value by providing liquidity to markets as well as information on prices. The vice economy, which is assisted by the legalization of gambling and aided by the progress of technology, undoubtedly has real disadvantages. There is also no doubt that the US government needs more income. Pure gambling tax is a good place to get it. And if I was the gambling type – which I am not, though I like a good card game – I would also bet on many other economic activities on higher taxes. © Bloomberg The author is a Bloomberg -Opinion columnist who covers economics. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Tax #Investing #US Economy Read the following story