The North Carolina House is advancing a bill allowing gamblers to deduct losses made on wagers from their state income taxes.
House Bill 14 advanced out of a House committee over opposition and will now go to the House Finance Committee for further consideration.
The primary impetus for this proposal comes from the increasing gambling expansion in North Carolina, especially following the legalization of online sports betting in March 2024. The state reports that more than $6 billion has been wagered since the market opened.
Federal tax law now allows gamblers to deduct losses up to their winnings so that taxpayers won't be taxed more income than they made on their gaming. North Carolina, however, does not offer a similar deduction on the state level, so gamblers must pay state income tax on all winnings without crediting losses.
House Bill 14 attempts to do this in reverse by providing a deduction for gambling losses but not more than winnings. This prohibits anybody from taking a net loss.
One of the bill's sponsors, Rep. Keith Kidwell, a well-known gambling opponent, pointed out that this bill is not about encouraging gambling but about fairness in taxation. He contended that taxpayers should not be taxed on gambling winnings without the option to deduct them against documented losses.
Rep. Erin Paré, a co-sponsor, and Rep. Bryan Cohn echoed the same, adding that aligning North Carolina's tax policy with federal tax regulations would make tax returns easier for citizens.
Rep. Cohn clarified that the state has to comply with federal tax regulations, which underpinned the bill's central argument of tax equity.
No Clear Path to Approval
Although it enjoys the support of several lawmakers, the bill has drawn opposition from both socially conservative constituencies and those who are more concerned with its budgetary impact on the state's revenue.
Reverand Mark Creech, one of its most vocal opponents and a lobbyist for the conservative organization Return America, characterized the bill as a would-be "gift to the gambling industry."
He argued that permitting gambling deductions would promote gambling play, particularly for gamblers with problem-gambling tendencies. Creech warned the bill would potentially financially enrich gambling operators to the detriment of vulnerable gamblers and the public good.
Among the bill's uncertainties is the amount of money the state stands to lose if the bill is passed into law. No official projections of tax revenue losses were made during the hearing.
However, given the amount wagered since North Carolina online sports betting was legalized, the potential financial impact could be substantial. If North Carolina legalizes deducting gambling losses from taxable income, critics argue that the state could take in less money from income taxes on gambling winnings, potentially impacting funding for government programs.
House Bill 14 has already passed through the House Commerce and Economic Development Committee but remains under consideration by the House Finance Committee. If passed there, the bill will appear for a full House vote before being heard in the State Senate.
