According to Russ Fox, a Las Vegas tax professional who runs TaxableTalk.com, Blumstein’s actual prize shrinks to a mere $4,310,571 after he pays the appropriate federal, state, and local income taxes. Still, that amount counts as the biggest prize, but by just over $800,000, rather than the pre-tax prize jump of $4,165,000.
The person with the second-biggest payout after taxes is Benjamin Pollak, who placed third. Even though Daniel Ott won second place, which paid out $4,700,000 – $1,200,000 more than Pollak’s third place prize, Ott will only see $2,600,194 of that money, thanks to the tax man.
So, to recap, the second-place player will receive almost $900,000 less than the player who finished third. In fact, Ott’s take-home is a mere $194 above John Hesp’s after-tax prize.
The United Kingdom is a haven for poker players
There are two major reasons for these discrepancies. First of all, the United States and the United Kingdom have a tax treaty that declares gambling winnings to be non-taxable.
Secondly, the UK does not collect tax on gambling winnings. Thus, professional poker players are unaffected by income taxes in Britain. The four players (Pollak, Hesp, Antoine Saout, and Jack Sinclair) who reside in the UK took every dollar of their prize home.
Pollak and Saout were major beneficiaries of the legal conditions in England. Had both players remained in their native France, they would’ve expected to pay roughly 48% of their winnings to the government.
Pollak and Saout moved to the United Kingdom by virtue of the European Union’s agreements with each other. It is unlikely that players from EU countries will have this option much longer since Britain voted to leave the EU last year.
For right now, the four final tablists can enjoy their wins without a visit from the taxman. Here are the “real” results for the final table:
|Player Name||Place Finished||Pre-tax Prize||Post-tax Winnings (estimated)|
*the information in this table was gathered from TaxableTalk.com – credit to Russ Fox, E.A.
So, Pollak, Saout, and Sinclair finished with more money than their place would suggest. Damian Salas, the 7th place finisher, will also not pay taxes to his home government of Argentina. Unfortunately, no tax treaty between the US and Argentina exists, so Mr. Salas will have to leave 30% of his prize for the Internal Revenue Service.
There are many options, but don’t start packing yet
Many US players might be inclined to seek citizenship or permanent residency in the UK for the tax benefits. In fact, there are many first-world countries that do not require players to pay taxes on some or all of their winnings. According to vegasmaster.com, they are:
- Czech Republic
- United Kingdom
Selecting the right country in which to become an expatriate will depend upon each player’s individual situation. However, emigrating or trying to become a permanent resident in any foreign country comes with its own set of obstacles and challenges. Even Canada is not an open door for American players.
Furthermore, US citizens must still pay taxes to the US government, even if they are living overseas. So, in the case of the four Americans at the final table, a sudden move would not save them from the IRS.
In the end, the only guaranteed winner is the taxman
No matter what, the Internal Revenue Service stood to collect a large chunk of the prize pool as income tax. State and local governments also have the ability to dip their fingers into the pot.
For instance, the IRS alone collected almost $6.4 million from just the final table’s share or 24.3% of the final table prize pool. If we expand that percentage to the entire field (which the IRS more or less does), the tax agency is due roughly $16 million dollars from the total pot. This amount is almost four times as much money as any single player collected and is almost more than the entire final table’s take-home combined.
State and local governments took an additional $1.2 million from the final table group, bringing the overall tax burden for the final nine to just over $7.5 million, or roughly 29%. As astounding as this figure may be, Mr. Fox wrote that this number is actually on the low side of typical collections, due to the four players who owed no tax.
There is no doubt that making the final table of the WSOP Main Event is a dream come true for every poker player. The payouts are the largest in most of the participants’ careers, and will always be so.
However, it must put a bit of a damper on things to work so hard for that money, to achieve the pinnacle of one’s sport, and then, to owe the government 29 cents on the dollar for every dollar won. Perhaps the United States should listen to Europe on this one.