On December 10, the National Thoroughbred Racing Association (NTRA) intensified its efforts to repeal a contentious element of President Donald Trump’s summer tax reform, which could reportedly siphon over $1 billion from the pari-mutuel betting industry. This comes as NTRA President and CEO Tom Rooney emphasized the organization’s primary objective: advocating the WAGER Act in Washington, designed to allow horseplayers to offset their entire wagering losses against winnings for federal tax purposes.
During the Global Symposium on Racing in Tucson, Rooney addressed attendees, highlighting the critical importance of passing the WAGER Act. He indicated that the bill could potentially be applied retroactively, aiming to include the 2025 tax year even if it receives approval in early 2026. “We are told it will be retroactive,” Rooney assured, underlining the urgency of the legislative push.
The controversy arises from the One Big Beautiful Bill Act (OBBBA), enacted by President Trump on July 4. While this law introduced several favorable changes, like reduced federal taxes on overtime and tips, it also quietly altered the rules surrounding gambling losses. Starting in 2026, taxpayers will only be able to deduct 90% of their gambling losses against winnings, effectively creating taxable “phantom income” for bettors.
Rooney and other industry leaders argue that this 10% “haircut” on deductions negatively impacts the betting landscape, potentially reducing the volume of bets and consequently, the prize pools and purses. “While there were many victories for our sport in the legislation passed this summer, we noted that work needed to be done to repeal the language that would effectively tax horse players on phantom income,” Rooney stated, pointing out the adverse effects on a $36 billion industry that supports nearly half a million jobs and numerous small businesses.
In a bid to counteract the negative implications of the OBBBA, Congressman Andy Barr from Kentucky introduced the Winnings and Gains Expense Restoration (WAGER) Act. This proposed legislation intends to restore the full deductibility of gambling losses, reverting to the previous tax framework. Barr argued that the new tax provision under OBBBA would not only impact professional horseplayers but also racetracks and breeding operations reliant on strong betting volumes.
Support for Barr’s bill is widespread among key stakeholders in Kentucky’s racing scene, including Keeneland, Churchill Downs, and The Jockey Club. Projections shared by NTRA and its allies estimate that the 10% cap could lead to a 5-8% reduction in pari-mutuel handle, translating into over $1 billion in lost revenue.
Shannon Arvin, CEO of Keeneland, stressed the necessity of the WAGER Act, stating that allowing full deduction of losses is crucial for maintaining a vibrant wagering ecosystem, which is instrumental in driving purses and supporting the larger racing economy.
Rooney highlighted the broader implications of the tax change, noting that bettors might seek alternative betting avenues, such as sports betting or online casinos, if the tax framework remains punitive. “The problem with that is the people that bet on horses, the billion dollars that you think that you’re saving, those bettors might just go elsewhere,” he elaborated, emphasizing the potential loss of revenue and economic activity tied to horse racing.
The NTRA estimates that the racing and breeding industry supports approximately 500,000 jobs nationwide, factoring in indirect employment sectors such as grooms, veterinarians, and transport services. The potential adverse ripple effects extend beyond the immediate betting circles, affecting a wide range of ancillary businesses and communities.
Timing is a pressing concern for those in the industry, with the 90% cap set to take effect in the 2026 tax year, impacting returns filed in 2027. Industry advocates are pushing for a legislative remedy that includes the 2025 tax year, ensuring continuity in tax practices without a detrimental gap.
Rooney informed the Tucson audience that the NTRA had been actively engaging with Congress to secure this retroactive provision. He noted that Congress has a precedent of implementing retroactive relief, especially for technical tax adjustments, though political challenges may arise, particularly in election years when such moves could be portrayed as niche benefits for a specific group.
The question remains whether Congress can act swiftly enough to prevent the new tax measures from taking effect. In the meantime, NTRA is urging horseplayers and industry affiliates to rally behind the WAGER Act, positioning it as a measure of equity rather than a preferential carve-out. “Ensuring that our customers are not taxed on money they never actually keep is not a loophole – it is common sense,” Rooney asserted.
The legislative battle over the WAGER Act highlights the broader stakes for the horse racing industry, with billions in annual betting and thousands of jobs in the balance. As the sector braces for the potential impact of the new tax rules, the outcome of this policy debate will likely shape the industry’s economic landscape in the coming years.
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