Regulating online poker and sites by "taxing" the rake?

bluefall · #1 11-25-2007, 12:03 AM

To regulate poker within the US and draw taxes, what if the US government installed a separate rake-like tax? I would suggest this would have to be about 2.5% of the pot, perhaps mandating the site charge no more than 2.5% additional rake. My proposal would then eliminate the requirement to report poker winnings as income.

To make this work internationally, there would need to be a way to tax only US citizens meaning the sites would need to be very strict on verifying people's identities. So any pot an American wins, the gov't taxes the pot 2.5%. They would also take half of the typical 10% tournament entry fee.

I can't see this working without the tax portion of the rake being uncapped so that people aren't earning millions without paying a significant tax. That would seemingly limit the amount of super high stakes games unless those pros think their edge is enough to overcome the uncapped rake.

So the gov't gets their take, sites pay their tax by earning only 2.5% instead of 5% rake, and players pay more tax by playing in rake-uncapped pots.

The best thing for the government is that winning and losing players are taxed because it's done on every pot a US player pulls, not based on "sessions." Plus they'd be guaranteed to get their take since players aren't required to report their income.

It would then make sense to teach poker in schools to: 1) tax more and, 2) improve the trade deficit by taking more pots off foreigners.

Thoughts? This tax strategy seems balanced and makes sense to me. If I missed someone else's post on this idea I apologize.

Spaded · #2 11-25-2007, 12:14 AM

An extra 2.5% (the sites already rake 5%) would be devastating to anyone's winrate, especially if there was no cap. I would much prefer that uncle sam take 25% of all my cashouts instead of 2.5% of every pot that I win.

bluefall · #3 11-25-2007, 12:22 AM

It would be 5% total...2.5% for Uncle Sam, 2.5% for the site. I just don't see how it could be done without charging more than $3 on a $100k PLO pot. And I don't see how Uncle Sam would allow a cap on their cut either since he doesn't give a lick about our winrate.

Lottery Larry · #4 11-25-2007, 12:33 AM

So you want to FURTHER encourage the IRS to treat gross session wins as if they are not affected by gross losses?

Bad idea imo

NickMPK · #5 11-25-2007, 12:37 AM

I don't know of any state that taxes gambling in the way you describe. Typically, the tax would come in the form of a percentage of the casino's win (or the casino's total rake in the case of poker), or the casino's corporate profits. The consumer never actually "sees" the tax. I don't know why it would be any different for internet gambling.

bluefall · #6 11-25-2007, 01:10 AM

[ QUOTE ]
So you want to FURTHER encourage the IRS to treat gross session wins as if they are not affected by gross losses?

Bad idea imo

[/ QUOTE ]

How so? If you play terrible poker, losing every hand, you'll pay zero tax. That would mean you only pay tax when you win.

Shoot, I've spent 4 years grinding limits where I more often than not pay 5% rake and yet I make money. Therefore, I don't see how paying the same 5% and then NOT paying income tax on top of that would be a bad deal for me.

[ QUOTE ]

I don't know of any state that taxes gambling in the way you describe. Typically, the tax would come in the form of a percentage of the casino's win (or the casino's total rake in the case of poker), or the casino's corporate profits. The consumer never actually "sees" the tax. I don't know why it would be any different for internet gambling.

[/ QUOTE ]

But the consumer still needs to pay income tax. The entity that is affected the most is the poker site, since the rake they charge will be half as much as they received from American players before.

LT22 · #7 11-25-2007, 01:40 AM

[ QUOTE ]
So you want to FURTHER encourage the IRS to treat gross session wins as if they are not affected by gross losses?

Bad idea imo

[/ QUOTE ]

he's sayin the rake would be the same (5%), split profits between site/gov't

ericicecream · #8 11-25-2007, 02:06 AM

[ QUOTE ]
An extra 2.5% (the sites already rake 5%) would be devastating to anyone's winrate, especially if there was no cap. I would much prefer that uncle sam take 25% of all my cashouts instead of 2.5% of every pot that I win.

[/ QUOTE ]

If i am understanding correctly, the sites make only 1/2 their normal profit whenever a u.s. citizen wins a pot. Correct?

If I'm a site, I'm thinking that if I agree to this then soon other countries will be demanding the same. I mean, why wouldn't they? Why should only the u.s. get to tax global online gambling?

I commend you for coming up with a unique idea, it's out of the box thinking that eventually comes up with innovative products. But this doesn't seem to work.

ericicecream · #9 11-25-2007, 02:08 AM

[ QUOTE ]
It would be 5% total...2.5% for Uncle Sam, 2.5% for the site. I just don't see how it could be done without charging more than $3 on a $100k PLO pot. And I don't see how Uncle Sam would allow a cap on their cut either since he doesn't give a lick about our winrate.

[/ QUOTE ]

Oops, meant to quote this one in my above response.

Spook · #10 11-25-2007, 02:36 AM

you can large number this, and get an average number of pots that are won by americans. Lets say 80%, then the poker site is paying 2% rake and collecting 3% rake for itself.

Irregardless of who actually wins the pot.

So if they want to make 5%, they up their rake to 7% rake and pay the 2.5% to USG on american pots which is 2 percent if 80% of players are american, and keep 5%.

So now everyone is taxed and the poker site makes its desired rate.