Bill nulls gambling write-offs


POSTED: Saturday, May 09, 2009

If you lose money in Las Vegas, it might well stay in Vegas for good if a bill on Gov. Linda Lingle's desk is signed into law.





        House Bill 1495

» Introducers: Rep. Pono Chong (D, Kaneohe) and Blake Oshiro (D, Aiea-Halawa)


» What it does: Repeals the deduction of wagering losses for Hawaii state income tax purposes


» Status: Passed final House and Senate readings; sent to Gov. Lingle for her signature




House Bill 1495, introduced by Rep. Pono Chong (D, Kaneohe), would no longer allow Hawaii residents to deduct their losses to offset winnings from out-of-state gambling.

“;At the beginning of the session, when we were facing the $2 billion shortfall, we were looking at every way to raise revenue without raising general excise taxes,”; said Chong. “;This was an idea that came up. Is it good policy to allow people to deduct something that we don't allow in the state?”;

Under the current U.S. Internal Revenue Code, the state allows Hawaii residents to deduct wagering losses against wagering income, but it is one of two states in the nation that prohibits gambling. The other is Utah.

A taxpayer can only deduct an amount equivalent to gambling gains. If passed, the bill would be retroactive to Jan. 1.

“;Allowing this deduction for state income tax purposes, in effect, subsidizes the other 48 states that do allow gambling,”; says the bill.

Kurt Kawafuchi, director of the state's Department of Taxation, supported the measure, saying that allowing Hawaii residents to deduct their losses encourages taxpayers to spend money outside of the state. Las Vegas is one of the most popular vacation destinations for Hawaii residents.

Spokesman Rob Stillwell of Las Vegas-based Boyd Gaming, which owns Vacations Hawaii, specializing in package trips to the city, said Boyd is watching the bill closely. Stillwell was not able to elaborate by press time yesterday.

“;Removing this tax incentive may encourage taxpayers to vacation within the state, thereby assisting our already hard-hit visitor industry,”; said Kawafuchi in his testimony.

Kawafuchi also said the bill would generate additional revenue, but acknowledged that there is no hard data. He said if, for instance, $5 million was claimed in gambling losses, the state's revenue gain would be $300,000 a year.

The bill brought little testimony in opposition, other than from the Tax Foundation of Hawaii, which said it was questionable whether the revenue generated would result in a windfall, and that it would run contrary to the state's intent to conform to the federal Internal Revenue Code.

Hawaii lobbyist John Radcliffe called the bill unfair, punishing residents for taking a legal loss on a legal activity out of state.

“;Anybody would think it's unfair,”; said Radcliffe. “;It's another anti-sin measure, along with cigarettes and liquor.”;

The governor has until July 15 to make a decision on the remaining bills on her desk.