SLOT Act Long Overdue

Slots machines in the casino of the MGM Cotai Resort. Anthony Wallace / AFP

Anyone who has played slot machines long enough has likely gotten lucky and hit a jackpot. But jackpot is a relative term and according to the IRS, it means anything with a payout of $1200 and over. But that amount could be increased in the near future.  

Gambler’s Bill 

Since 1977 a tax is automatic on any jackpot in the amount of $1200 and above but we all know that the value of money changes and $1200 today is not what it was 45 years ago. Yet, there have been few, if any, attempts to raise the minimum tax threshold until recently. Thanks to US Representatives Dina Titus (D-Nevada) and Guy Reschenthaler (R-Pennsylvania), the onerous minimum could be raised before this session is over.  

The Shifting Limits on Thresholds (SLOT) Act proposes to raise the floor from $1200 to $5000 as the minimum jackpot necessitating an IRS tax. Naturally, slot players are rejoicing but whether President Biden ultimately signs this bill into law remains a mystery. 

“Due to inflation, the number of jackpots hitting that threshold, triggering a shutdown of the machine and necessitating excessive paperwork requirements for the patron, has increased dramatically,” said Representative Titus. “This creates an unnecessary burden on the gaming industry, an economic driver for Southern Nevada and other communities nationwide where slot machines exist.” 

American Gaming Association President and CEO, Bill Miller, said, “Increasing the slot tax threshold to account for inflation is a long-overdue change that will alleviate unnecessary administrative burdens on casino operators, their customers, and an understaffed and overwhelmed IRS.” 

Less Paperwork 

It is not surprising that the bill has industry support as it will reduce the paperwork required for the casinos and keep their machines operating. When a jackpot is hit, the machine is automatically shut down and an attendant is alerted. At that point, the employee must bring the required tax forms and retrieve identification from the customer to ensure the forms are properly filled out. This takes a while and the machine is out of action throughout the process. 

And while all of that is true, the more important aspect of this bill is that it would be less onerous on the customers knowing that they could hit a jackpot for less than five grand and could subsequently submit their winnings on their own accord. As stated in tax law, gamblers are required to report winnings as “other income” via a 1040 tax form. However, it is obvious that forcing a customer to sign a W-2G form from the casino in order to get paid would effectuate 100 percent compliance whereas allowing gamblers to do so on the honor system, well, not so much.  

Nevertheless, it is important to note that $1200 in 1977 is now worth over $5500 in 2022 dollars. Representative Reschenthaler stated, “Because the threshold has not kept up with inflation, it has resulted in a drastic increase in reportable jackpots, which trigger tax burdens for winners and compliance burdens for casinos. Increasing the threshold will eliminate this onerous red tape, ensuring the gaming industry can continue to support good-paying jobs and foster economic growth in Pennsylvania and across the country.” 

This higher threshold would also ostensibly increase slot traffic once players are made aware of the shift in the tax threshold. But whether this winds up on President Biden’s desk is another matter.