Our Big Beautiful Red Ink

The White House’s July 4 victory lap over the One Big Beautiful Bill Act (OBBBA) had barely subsided before two members of the House of Representatives rushed to repeal a little-noticed provision.

The Senate added it during final deliberations, limiting the gambling losses taxpayers can deduct from their income to 90%.

Introduced by Rep. Dina Titus, D-Nevada, the “Fair Bet Act” aims to reinstate the original 100% allowable deduction of gambling losses. If left untouched, the 90% limit will apply in 2026. Texas Rep. Troy Nehls became the first Republican to cosponsor the legislation.

As Newsweek’s story outlined, the deduction limit means that if a gambler loses $10,000 during a trip to Las Vegas (or any nearby casino or online operation) and wins back $10,000 on a later visit, they would still be liable for taxes on $1,000.

In a statement, Nehls noted the House version of the bill contained a 100% deduction, but the Senate reduced it to 90%, “creating an overly punitive tax on gambling. This provision is unfair…”

Bigger Concerns

As German philosopher Friedrich Nietzsche once said, “The devil is in the details.”

While I suspect many people feel like me (“Tough luck, folks”), I am more concerned about the collective red ink expected during the next decade under OBBBA.

This story in Reuters noted that the bill:

• Raised the nation’s debt limit by another $5 trillion, which is only slightly less than our total debt at the turn of the century. That is alarming.
• Reduce tax revenues by $4.5 trillion.
• Add $3.4 trillion to the national debt.

“BlackRock warned … that foreign buyers were already souring on American debt,” reported David Barbuscia. “There was a real risk that demand for the $500 billion in debt the U.S. issues every week will fall even more and push borrowing costs even higher.

“‘We’ve been highlighting the precarious position of the U.S. government’s indebtedness for some time now, and, if left unchecked, we view debt as the single greatest risk to the ‘special status’ of the U.S. in financial markets,’ BlackRock’s investment managers said in a note.”

Passing Out Money

Another concern I have with OBBBA is its exclusion of some taxes on tips and overtime pay, allowing deductions for interest on new car loans, and increased exemptions for federal estate and gift taxes.

Lest I sound like Ebenezer Scrooge, I’m not opposed to people getting tax breaks. What I am concerned about is the overriding question every one of our representatives should ask themselves: Can our country afford this?

As I look at our ever-increasing red ink, no matter which political party is in charge of the White House and/or Congress, the answer would seem to be a resounding, “No!”

Take, for example, the Yale Budget Lab estimate that excluding tips from payroll taxes could decrease revenues dedicated to Social Security and Medicare by $88 billion by 2035.

In the process, that could accelerate the projected depletion of the Social Security Trust Fund. Once forecast for 2035, the latest estimates are reducing that to 2033.

This at the very time our country should be examining ways to shore up the Trust Fund. Such as raising the amount subject to taxes, a slight rate increase, or another retirement age hike. (The latter only makes sense when life expectancy far exceeds the average when the system began.)

For years, Social Security has issued warnings about the system having to cut benefits by around 25%. I wonder whether Congress will dither long enough to ensure that actually happens.