Wednesday, April 22, 1998 | 10:11 a.m.
WASHINGTON -- Scholarships versus gambling deductions -- the great debate that never came to pass.
Supporters of the gaming industry avoided that debate Tuesday when they convinced Sen. Daniel Coats, R-Ind., to give up on his effort, for now, to do away with a provision that allows gamblers to deduct their losses on taxes.
One of the most ardent opponents of gaming, Coats had planned to offer an amendment Tuesday that would repeal the gambling-loss deduction. The estimated $1.1 billion in savings over four years would have gone to increase the tax break for people who make donations to schools or private foundations providing scholarships to low-income children to attend private schools.
Coats had hoped to frame the debate in moral terms, pitting inner-city kids against gamblers. "This amendment gives senators a clear choice between helping underprivileged kids or continuing to line the pockets of gamblers," he said Monday.
By Tuesday, however, Coats relented to pressure from a number of senators who support gaming, including Senate Majority Leader Trent Lott, R-Miss., whose home state is one of the most prominent areas of riverboat gambling.
Coats remains committed to eliminating the gambling-loss deduction but realized his amendment stood no chance of passing, which would have defeated his chance of increasing the tax exemption for donations to scholarship foundations for poor children, an aide said.
"He is more concerned about the education of inner-city poor children," Tim Goeglein, Coats' spokesman, said.
Under current tax law, gamblers may deduct their losses from gambling winnings for a given year, similar to the way capital gains are taxed. A person who wins $5,000 in one trip to the casino must report that income to the Internal Revenue Service, but that person could also report losses from other casino trips to defray his or her net gambling income.
The gaming industry vigorously opposed Coats' bill, contending that, by Coats' estimates, it would save $3 billion over 10 years -- a $3 billion tax hike on legal gamblers. The industry also stressed that the loss deduction could only be used to make a person's gambling income zero for a year. It could not be used to create a net gambling loss, and then be deducted from other income sources.
Sen. Richard Bryan, D-Nev., contended that Coats was using the tax deduction for scholarship giving as a smokescreen to go after gambling, and the gambling-loss deduction in particular.
"The gambling-loss tax deduction has become a target, so we might see this again," he said.
Coats agreed, and promised to bring the issue up again, perhaps later this year in another amendment pitting funding for a moral issue against the gambling deduction.
"Sen. Coats is committed to this issue," Goeglein said.
Several senators have proposed eliminating the deduction and a bill has been sent to the Finance Committee, but, as a member of that committee, Bryan has vowed to block the bill. On the House side, Rep. John Ensign, R-Nev., is positioned on the tax-writing Ways and Means Committee to block the bill.
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