Here’s a question that I know most of you would love an answer to: “What is the relationship between gambling and income?”. So did we, for the record… so on this page with present statistics on gambling by income.
Lucky for us, the IRS has compiled data which shows that Americans in all income classes (even the 1%!) love to gamble. Yes, in 2009, 284 of the taxable returns with over $10,000,000 in adjusted income had gambling winnings reported! So, dear readers, let’s take a look at gambling in the United States…
A Strict Definition of Gambling Winnings
Let’s go to our friends at the IRS to figure out what constitutes gambling winnings:
- $1,200 or more in gambling winnings from bingo or slot machines
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager
- Any other gambling winnings subject to federal income tax withholding (technically, you must report from the first dollar)
One problem: this only catches the winners. (Perhaps some of the brackets are very unlucky? Perhaps they are playing games with payouts less than $600?)
There is likely bias towards larger bets, which might be expected to come from the ‘right side’ of the income scale. It would be nice to be able to strip table games out of this data and leave animal racing, slot machines, and lotteries – but we play the hand we’re dealt!
Okay, enough said… let’s look at the stats for 2009, courtesy of the IRS…
Percentage of Returns Reporting Some Gambling Winnings
For this first chart the percentage represents the percentage of taxable tax returns in each income bracket which reported gambling winnings.
Percentage of Returns Per Bracket and Percentage of All Reported Gamblers on Taxable Returns…
This chart is a little more confusing, but ‘orange higher than blue’ means that the income bracket in question gambles more than would be expected. The blue bars represent the share of total taxable returns. The orange bars represent the percentage of total taxable returns which also report gambling winnings.
Gambling by Income: Interesting Stuff!
So there you have it – it’s probably not fair to call gambling a ‘poor tax’, unless you still think I defined away ‘lottery’ too easily in this article. (If you can find a more reliable source, let me know). Here’s how it all plays out… for every bracket under $50,000 in AGI, there are less returns with gambling winnings than would be expected by the size of the population. From $50,000 on up? Ahh, there be gamblers!
So there you have it… the 7-figure folks are the ones with a higher number of returns reporting gambling income than others.
Is it a bullish sign when our $1,000,000 – $1,500,000 and $2,000,000 – $5,000,000 earners are gambling at such a clip?
Still want to call the lottery a ‘poor tax’?
How do you think this would change if we took out table games?
Do you gamble? How does it affect your personal finances?