In a significant legislative move, the North Carolina House of Representatives is currently deliberating a bill that could allow state residents to deduct gambling losses from their income taxes. This proposal, which aims to align state tax policies with federal regulations, has stirred a mix of support and opposition across political and public spheres.

The bill, officially recognized as House Bill 14 (pdf), was introduced by a bipartisan group of lawmakers and has rapidly progressed through the House committee stages. Spearheaded by Rep. Keith Kidwell (R-Beaufort) and Rep. Erin Paré (R-Wake), the bill proposes that gamblers should have the ability to offset their taxable income with losses incurred from gambling, up to the amount of their winnings.

During a recent session, Rep. Kidwell emphasized that the bill is centered on “fairness to taxpayers” and should not be seen as a promotion of gambling. “This is not a gambling bill, this is a fairness in taxation bill,” Kidwell explained, according to NC Newsline, highlighting the disconnect between state and federal tax treatments of gambling winnings and losses.

The motivation behind the bill stems from the significant wagering activity in the state, especially following the legalization of online sports betting in March last year. State reports indicate that over $6 billion has been wagered since the market opened, underscoring the bill’s potential impact on a large number of taxpayers.

Debate Continues

Critics of the proposal, such as Rev. Mark Creech of the conservative group Return America, argue that the bill might inadvertently encourage gambling by lessening the financial sting of losses. “Allowing the tax deductions would keep addicted individuals on the hook — the very people who generate their profits — rather than protecting the average citizen who gambles,” Creech stated in his remarks, which were not presented during the latest committee discussion.

Supporters like Rep. Bryan Cohn (D-Granville) counter that aligning with federal guidelines is a prudent step. “State policy should follow federal guidance,” Cohn remarked during the committee vote.

The debate also touches on broader tax reforms being considered by the state legislature, including a proposal to eliminate taxes on tips and overtime pay, reflecting a similar federal initiative proposed by former President Donald Trump.

As the bill moves to the House Finance Committee for further evaluation, the precise fiscal implications remain unclear due to the absence of an official revenue impact estimate. However, proponents argue that the change would prevent an unfair tax burden on citizens who, despite winning equal amounts, end up paying taxes without considering their net gambling losses.

The outcome of this legislative effort will not only affect the wallets of many North Carolinians but also set a precedent for how the state handles the intersection of tax policy and gambling activities. As discussions continue, both sides of the aisle are gearing up for a detailed examination of the bill’s potential economic and social impacts, making it a key issue to watch in the current legislative session.