California Rep. Adam Gray, long perceived as a champion of gaming expansion in the Golden State, has ruffled some feathers by introducing a bill that would end deducting gambling losses from state taxes: “Inland California Healthy Communities Act.”
Gray last week called the deduction a “sin subsidy for the rich,” that chiefly enriches wealthy patrons of tribal casinos. It’s a large amount, an estimated $300 million annually, a “loophole” enjoyed by about 150,000 people, according to Gray.
Gray, who chairs the Assembly committee that oversees gaming, declared, “If Congress wants to pay to subsidize gamblers that’s their business, but we have families in California who cannot safely drink the water in their homes or get in to see a doctor.”
Gray wants the money the state keeps to be used to help fund a University of California teaching hospital at UC Merced and the UC Riverside School of Medicine, plus fund clean water for about 1 million residents in areas where clean tap water is not available.
Some argue that not only the rich benefit from Gray’s “loophole.” Professional poker players, who in general make a modest living at the state’s card clubs and casinos, would also be affected.
Card players weren’t always allowed to deduct their losses. It wasn’t widely allowed until the landmark tax refund case of poker legend Billy Baxter which in 1986 established that gambling winners are considered “earned income.”
Card players don’t have a lot of political clout, but gaming tribes have a lot, and they are lining up to angrily oppose Gray’s bill. The tribes are one of the largest non-governmental sources of revenue to the state’s budget. Moreover, they donate millions of dollars a year to causes they care about.
In fact, for many years Gray himself has collected some of that largesse because of his sponsorship of various gaming bills, such as online poker and sport betting. He has often sat down at the negotiating table with tribal representatives.
California’s Tribal Alliance of Sovereign Indian Nations released this statement last week: “Although seemingly popular, elimination of this deduction will have consequences –primarily on tribal governments – which we have not had the opportunity to adequately analyze given the absence of any meaningful consultation with Indian tribes.”
