This is a definitely a cause of concern for gamblers who are Hawaii residents, and for others as well.
First, about Hawaiians and Las Vegas.
Our Hawaii writer is certainly not alone in her love of Las Vegas. While the Las Vegas Convention & Visitors Authority doesn’t publish statistics on exactly how many visitors come to Las Vegas from Hawaii, it does collect data on air travel that captures direct flights. In their 2007 "Top 50 Air Markets" report, Honolulu was the seventh-largest market for air travelers to Vegas, with 473,606 passengers. This does not include Hawaiians who fly to the West Coast and then drive or fly from there, so there are probably many more trips made by Hawaii folks.
Even without knowing these statistics, the Las Vegas-Hawaii connection is obvious to anyone who visits the three Boyd Gaming properties downtown (the California Hotel, Main Street Station, and the Fremont), where Hawaiian food items are on most of the menus and the majority of the guests are from the Aloha State. (LVA asked Boyd Gaming for its perspective on the proposed tax, but received no reply.)
But Hawaii folks venture all over the valley; if you go to the Trader Joe’s on Decatur, you’ll see that they publish a list of the most popular items purchased by their Hawaii customers. So many former Hawaii residents have relocated permanently to Las Vegas that Hawaiians sometimes call it the "Ninth Island."
Now, about that bill.
With little debate (only two hearings) and almost no press coverage, the Hawaii Legislature in early May passed a law that would remove the deduction of wagering losses against wins on residents’ income taxes. House Bill 1495 cleared both the state House and Senate and now sits of the desk of Gov. Linda Lingle, who has until July 15 to choose to veto it, sign it, or let it pass into law without her signature.
Introduced by state Rep. Pono Chong (D) (whose first name in Hawaiian ironically means "fair"), it imposes the state’s income tax on all gaming wins by removing the deduction of losses. Under current law (as detailed in Jean Scott and Marissa Chien’s Tax Help for Gamblers), you’re only responsible for taxes on your net winnings. So if you win a $2,000 jackpot but can document you lost at least that much in the same year, you pay no taxes.
If this bill becomes law, it will be a huge negative for Hawaii gamblers. If, for example, you win $2,000, you will owe the state money on this year’s taxes, even if you lost $2,000, $4,000, or more while playing. For most players from Hawaii, the marginal income tax rate is 8.25% for people with taxable income of $40,000 and above … so you would owe an additional $165 in taxes if you won $2,000.
Because Hawaii is facing a huge budget shortfall, it actually gets worse for some Hawaii residents. The Legislature has passed and already overridden a vetoed bill that raises the marginal tax rate on people earning over $200,000 a year to 11%. High rollers who have a breakeven year in 2009 will be penalized heavily –- and the bill is retroactive to Jan. 1, 2009. In a reversal of what the mail sweepstakes say, you may already be a loser!
Why should gamblers from other states be concerned? Because the national and international recession shows no immediate signs of ending, state legislatures will continue looking to other states for new and creative ways to raise revenue. HB 1495 allows states with limited gambling to tax and benefit from gambling outside their borders, without the hassle of bringing casinos or lotteries into their own states. If this bill is successful, other states may very well follow suit.
Governor Lingle is asking for public input on which bills passed this year should be vetoed. People can e-mail their thoughts at [email protected], fax them to 808/586-0006 or call 808/586-0034.
