In a perfect world, the politicians would instantly see why it is impossible to tax gambling winnings. They would see that the money generated by gambling for the players is theoretically highly inconsistent, and that no matter how hard any given player tries, the game is inherently a negative sum game and therefore in the very long run you will have more losers than winners. Their own government would never even think about trying to double dipping the pie when the players win. The politicians would also realize that if they would tax something that would be the rake taken by the rooms that provide poker accommodations as a service, as its generation is devoid of “luck” or any of its incarnations. We would also have Unicorns flaunting their perfect manes in the wild, and rivers aplenty, and also a TV channel that would magically know what you want to see and present it to you without any kind of commercials.
But sadly, the current world we live in is not perfect. In fact, it’s as far from perfect as it can possibly get.
In Canada, most of the winning poker players do not pay taxes. The thing is that by current Canadian law as stipulated in the “Income Tax Act”, earnings are taxed if they are “income from a business”. Poker can be seen by law as being a business, but most Canadian poker players are totally ignorant of this fact, or at least appear to be.
But what qualifies a person to be a business? When does his or her poker endeavors be akin to running a business? That is the key question that seems to be the central legal difficulty in the whole Canada Poker Tax rubbish. In a nutshell, you are not exactly legally required to pay taxes if you are a casual player. If you are a professional player, then yes, you have to. If you delay the payment of your taxes for too long, you may be subject to back taxes, which can prove to be very costly penalties that may even led individuals to the brink of bankruptcy. The thing is, that if Canadian authorities try to single out a lot of winning Canadian poker players as being subject to the tax law, an enormous amount of losing poker players will immediately raise their hands as well. It seems that under the “Income Tax Act” poker losses can be deducted from other forms of income such as any actual salaries and/or wages. There have been cases where the tax authorities have flat out denied the application of these deductions by losing players, claiming that they did not meet the requirements of being pro players (and to be taxed and or deducted). Hmmm, so when it is in your favor its go but when it’s not its no? This does not seem very fair to the unbiased observer.
But across the border to the south, the Americans are doing it wrong as well. Actually, they are doing it much much worse. The IRS will come knocking to your door the minute you gamble, whether you win or lose, and tax the hell out of you. When you lose, your losses will be deducted from only your gambling income and nothing more. Forget to deduct anything from your day job’s salary, as that has already its purpose. So whether you win or lose, they will want a piece of the pie (to fund more wars instate better health care for all for instance).
The question remains, why do these big, huge, enormous countries not follow the UK’s example on the matter? Under British law, no one touches any part of the gambling pie. It is your money, and you are allowed to wager some or all of it as you see fit. Win, and it’s all yours; lose, and it’s also all yours. The government does not get its nose in that. And it’s great. The reason it’s excellent is because, as already explained at the outset of this article, gambling always bears a negative expectation because of the luck factor. Poker is a little bit different as this negative expectation can be somewhat delayed or negated with a lot of skill, but it still is and will forever remain a negative sum game.
Taxing something that already is negative sum is like adding more negative to it, making it even more negative sum.
Yes, it does make sense: two wrongs definitely do not make a right.
Note to politicians around the world: the money generated from gambling will come into the economy anyway. If you want to tax, and we know you want to, tax the companies, not the individuals. It’s very tough to be a winning gambler, without needing to share the pie with others. And if you can’t tax the companies because they are not in your jurisdiction, some incentives to allow them to settle in your jurisdiction would not be a bad idea, amirite?