Should Gambling Losses Be An Itemized Deduction On State Taxes?

Melrose resident Donna O'Leary has taken advantage of a right that few may be aware of to address a situation that she compares to robbery.

Massachusetts is one of the few states that gives its residents the "right of free petition" — the ability for any resident to file state legislation.

O'Leary used that right around four years ago to pursue legislation that would allow Massachusetts residents to claim itemized deductions for any gambling losses on their state tax returns. Residents can already itemize their gambling losses on their federal tax return to offset any taxes on their winnings — as long as those itemized losses don't exceed the total winnings — but not so on Massachusetts state tax returns.

That seemed unfair to O'Leary, who said she plays slots at casinos in Connecticut and Rhode Island.

"To me, it's (gambling) just like a business," she said. "When you have a business, you only pay on your net gain. On the federal return, you can offset your losses up to your gains. But in the state of Massachusetts, you cannot do that. You have to pay taxes on your total W-2G (the tax form sent to people who win at gambling above a certain threshold). My theory is that's robbery, because if it were a business, all you're going to pay is on your net gain."

While any resident can bring forth a bill under the right to free petition, state law also requires that the bill must be endorsed for presentation by a member of the state Legislature before it can be considered.

In stepped Sen. Richard Tisei, R-Wakefield, who represents Melrose Wards 1-5-, and who actually filed the legislation on O'Leary's behalf. Tisei said that because Massachusetts residents have the right to free petition, as a policy, whenever constituents request that he file legislation, he does so.

He also thinks that O'Leary is right.

"It seems to me that it's only fair that (the state) also takes some type of account for gambling losses, provided that they don't exceeded the winnings," he said.

Although Tisei has filed the bill three times, each time it has gone before the Legislature's Joint Revenue Committee, which has sent it to study each time, effectively holding it in committee.

Tisei said that the bill has faced two problems, the first being that 7,000 bills are filed every year and "not every good idea makes it through the legislative process." More importantly, the state Department of Revenue has estimated that allowing residents to claim itemized deductions for gambling losses would cost the state anywhere between $11 million and $12 million per year.

"Obviously, anything that costs money, particularly over the last couple of years when budgets have been so tight, has gotten a lot of scrutinity," Tisei said.

When the bill was first filed four years ago, the subject of creating casinos in Massachusetts was before the Legislature, something that is before lawmakers again, with differing House and Senate bills that would create casinos in the state.

 "We are going to have a debate about expanding gaming in Massachusetts and I would expect that on this particular issue, I will offer it as an amendment," Tisei said. "It'll probably get some added attention his year. So, we'll give it a shot and see what happens."

O'Leary expressed some frustration that the bill has never made it out of committee, but as an unenrolled voter, credited Tisei with sticking with her bill.

"Sen. Tisei deserves the utmost credit for following it through," she said. "I give Sen. Tisei the credit for bringing it up, and bringing it up, and bringing it up."