New Federal ‘Fair Tax’ Bill Tries To Define And Tax Games Of Chance In US

Jessica Welman January 12, 2017 1383 Reads
tax on games of chance

A new bill being assembled by Sen. Jerry Moran (R-Kansas) is trying to put a legal definition on “chance” and possibly change the way games of chance are taxed in the future.

Moran’s bill defines “chance games”

According to ESPN Chalk, Moran released a preliminary draft of a forthcoming bill called the Fair Tax Act of 2017. The bill specifically defines games of chance as a bet or wager based on “(1) a random or unpredictable event or (2) an event over which neither the gaming sponsor nor the person purchasing the chance has control over the outcome.”

The proposed law stipulates games of chance be taxed at a rate of 23 percent. It is unclear whether or not sports betting in Nevada or daily fantasy sports would fall under this umbrella.

Both sports betting and DFS could certainly fit under Moran’s definition of chance. DFS operators have argued that the product they offer is not gambling and predominantly determined by skill.

Moran has pushed a Fair Tax bill before

In 2015, Moran co-sponsored a Fair Tax bill with Sen. David Perdue (R-Georgia).

Fair Tax is a tax system in which all taxes are based on consumption. Every retail good or service is subject to taxation. In turn, numerous other taxes are abolished along with the Internal Revenue Service.

“The FairTax Act deserves to be heard in a committee setting, debated, and given an up or down vote,” Moran said of his 2015 bill. “This tax reform proposal would have a positive impact on millions of taxpayers, allowing Americans to once again be in charge of their lives and money.”

The 2015 bill was introduced in January of that year and eventually died at year’s end. The 2017 bill is a reintroduction of the 2015 proposal. The draft available right now is 132 pages and is not the final draft of the legislation.

How does this bill affect other gambling law?

The issue of games of skill vs. games of chance continues to be debated in public forums as DFS wages political battles in numerous states. The poker industry trotted out very similar arguments when it waged legal battles in the wake of the Unlawful Internet Gambling Enforcement Act (UIGEA).

The root of most of the debates is denoting between games predominantly based on skill vs. predominantly based on chance. No one would argue poker does not have an element of chance. The debate is how much a person’s skill can influence their outcome in the game.

If Moran’s bill passes into law in its current form, the very broad definition of “chance” could fundamentally change how DFS, poker, sports betting and even arguably the stock market are legislated and regulated.

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