Taxation of Gambling in the United States: Comparing the Current System with Two Alternatives

ABSTRACT

Under current federal and state laws within the United States, the taxation of gambling activities is complex and largely inefficient. At the federal level, taxes on gambling providers are virtually nonexistent outside of normal corporate taxation laws. At the state level, the varying tax regimes within states lead to a complicated reporting environment, with differing calculation methods and varying tax rates for gamblers and gambling operations. For individuals, tax reporting can be cumbersome, complex, and ineffective. This paper discusses the current tax reporting environment in the United States, as well as the tax environments in other nations with large gambling industries, such as France, Macau, Singapore, and the United Kingdom. Finally, we calculate an estimate of tax revenues on gambling earnings based on the current U.S. tax regimes and compare them to hypothetical tax revenues calculated by using tax regimes in foreign jurisdictions.

Keywords:  gambling, gambling industry, taxation

Article Citation:

Christopher R. Jones, Spencer C. Usrey, and Thomas Z. Webb (2014) Taxation of Gambling in the United States: Comparing the Current System with Two Alternatives. The ATA Journal of Legal Tax Research: December 2014, Vol. 12, No. 2, pp. 34-53.