Betting on vice is bad tax policy

Nearly 40 states have expanded sports gambling since the Supreme Court legalized it nationwide in 2018. What was once the domain of Las Vegas or shady neighborhood bookies is now a multibillion-dollar online industry, with Americans wagering nearly half a trillion dollars since the ruling. Flashy ads, free bets, and mobile apps have fueled a pocket-based gambling boom—with side effects that are both predictable and deeply troubling.

Now, after a modest and long-overdue change to the tax treatment of gambling losses, the sports betting industry wants Congress to reverse course to protect its swelling profits. Lawmakers should stand firm. American taxpayers shouldn’t subsidize an industry that finances the expansion of big government and contributes little to long-term economic productivity.

Until recently, the IRS gave gamblers a sweetheart deal, allowing them to fully deduct losses from their winnings. If a gambler won $100,000 and lost $100,000, their tax bill was zero. But starting next year, under the provisions of the One Big Beautiful Bill, only 90% of losses will be deductible.

The gambling lobby is howling about this change, warning that some bettors might kick the habit altogether.

For too long, our tax code has treated gambling losses as if they were akin to ordinary business expenses. They’re not. A legitimate business creates value for both our economy and our society. It creates jobs, produces goods, and generates wealth that ripples throughout a community. Gambling, on the other hand, is a zero-sum game. We should not be writing tax laws that treat wagering on a football game as if it’s capital investment in a manufacturing plant.

The costs of this explosion in sports betting are becoming clearer every year. A growing body of evidence suggests that legalized sports gambling is worsening household finances and increasing personal bankruptcies. One study found that bankruptcy rates rise as much as 30% in the years after a state legalizes sports betting.

Meanwhile, the government is becoming the biggest winner in the gambling industry. New York has raked in more than $3 billion from taxes on sports books. Illinois now charges residents a 50-cent fee on every bet, hoping to fill its $3.2 billion budget deficit. All told, sports gambling has generated around $10 billion in state tax revenue across the country in the past six years.

Congress now faces a choice. Will it reinstate full expensing for gambling losses, effectively forcing the American taxpayer to subsidize an industry that contributes essentially nothing to long-term economic growth? Or will it uphold a modest change that signals the American taxpayers won’t be on the hook for bad bets and missed locks?

The reality is that if I want to bet on sports, I should be able to do that. But I should assume all the risk, not the American taxpayers. Our tax code ought to encourage work, investment, and innovation—not chasing 19-leg parlays.

Government should reward its citizens for building things of lasting value, rather than quickly filling out a digital ticket and hoping for the best. Congress must ignore the gambling lobby’s crocodile tears. The tax code should be flatter and fairer—not subsidizing sports gambling. Lawmakers ought to reject any attempt to reinstate full deductibility for gambling losses.