H.R. 6937, Shifting Limits on Thresholds (SLOT) Act, is a bipartisan proposal to increase the information reporting threshold for slot machine winnings from $1,200 to $5,000 and adjust it for inflation. The sponsors note that the threshold has been $1,200 since 1977.
Per co-sponsor Rep. Anthony G. Brown, this proposal “is a necessary modernization of our tax code.”
Really? This proposal would harm our tax law by reducing gambling winnings that get reported (that is, it would increase the tax gap) and make many people think that such winnings are only taxable if they exceed $5,000.
The reality is that winnings are taxable regardless of the dollar amount (unless the recipient’s total income is below the standard deduction amount). Information reporting is good and the dollar amount should be lowered rather than raised as there are decades of data from the GAO and others that tax compliance improves with information reporting.
Is the $1,200 threshold burdensome for casinos? Likely not as they have many laws to deal with and likely good reporting systems (including for player and loyalty cards) that would allow for a lower threshold for information reporting rather than a higher one.
What do you think?