Hawaii Residents Lose Twice if They Go to Vegas

If Hawaiian residents go gamble in Vegas, they lose if they lose, and lose if they win:

A new bill signed into law this month by Gov. Linda Lingle has some frequent Las Vegas visitors and local CPAs scratching their heads.

Under House Bill 1495, no longer will gamblers be able to offset their winnings with their losses for Hawai'i state income tax purposes. Previously gamblers would be taxed only on their net winnings, but now they will be taxed on gross winnings.

A Hawai'i resident who wins $10,000 in a year, for example, and loses $9,000 in the same year used to be taxed only on the $1,000 in net winnings. Under the new law, that resident would be taxed on the full $10,000 in winnings.

Even if you end up a net loser, you will still be taxed on whatever you won along the way.

Dennis Kohara, a certified public accountant in Honolulu, called the law "ridiculous."

"You sit down at the blackjack table. You win a hand. You lose the next one. You win another hand. You lose the next one," he said.

And, under the new law, you now owe taxes on all the winning hands, which are not offset by any of the losing hands, Kohara said.

State Rep. Pono Chong, who sponsored the legislation, acknowledged that Kohara is correct.

However, Chong said, the new law will mainly affect those who have substantial winnings, along with substantial losses.

The law is expected to add about $300,000 a year to Hawai'i tax revenue.

Frankly I think the whole thing is fishy. What right does Hawaii have to assess taxes on earnings not earned in their state? Somebody needs to challenge all of this.

And by the way, the new law is retroactive to January 1 so if you made a trip to Vegas earlier this year you're on the hook for the new taxes.