Originally I wondered why there was no form W-2G. You probably are wondering, "What the heck is IRS Form W-2G, and who cares if McCain ever filed one or not?"
Those are fair questions. IRS Form W-2G is similar to the W-2 form we all know and hate. However, instead of declaring wages, you use the W-2G to declare Gambling Winnings.
Now why should anyone care to ask John McCain about his W-2G filings? Answering that is slightly more complicated given his many years of marathon gambling sessions at the craps table and his ties to the gaming industry. However, let's start with the fact aides say McCain tends to play for a few thousand dollars at a time! Over the years that adds up to a big chunk of change. And that has potential tax consequences. Apparently, I was asking the wrong question. The real question is why hasn't he ever declared ANY winnings on his 1040, or any losses on his Schedule A? So....
UPDATE II - note title change... apparently this is the real mystery. (h/t to Mrick for really spelling this out)
Originally I was focused on the lack of a W-2G, but thanks to comments from Mrick it is now clear the question is really why he never posted any winnings on line 21 of his 1040, or any losses on his Schedule A. However, the bottom line is still the same: If you are winning or deducting losses, you have to report this to the IRS and it looks like McCain has never reported ANY winnings or taken ANY deductions -- in spite of heavy betting over many years.
What makes this lack of reporting more than a bit odd is we are talking about a guy who typically spent thousands of dollars on accountants to file his returns. He can't claim "I messed up" because he had professionals filling out the paperwork. Moreover, the returns that are part of the public record go into such fine detail they even note such trivial things as a mere 14 bucks in interest from a JP Morgan account (cf. 2006 tax returns) - yet in these same forms line 21 is totally blank. When you look at his Schedule A, you see a similar degree of scrupulous detail... yet there is still no mention of any gambling losses. So as far as the returns go, he never gambled. That is hard to reconcile with the fact it is well-known that he is a high-stakes craps player.
Reporting losses and winnings is not some arcane mystery. Here are some relevant instructions for filing from IRS Form W-2G. Although that form is for declaring winnings, note the form also has clear instructions even if you are gambling and losing money as well:
Generally, report all gambling winnings on the "Other income" line of Form 1040. You can deduct gambling losses as an itemized deduction, but you cannot deduct more than your winnings. Keep an accurate record of your winnings and losses, and be able to prove those amounts with receipts, tickets, statements, or similar items that you have saved.
It is pretty obvious why Uncle Sam wants to know if you are winning significant sums of money gambling. Why would Uncle Sam care if you were losing? Well, for starters, gambling is an all-cash transaction. If you don't regulate it, you are just inviting people to launder money through casinos. For example, consider this story from 2007: Terrorists Caught Money Laundering in Online Casinos, as reported in Online Poker News:
Three men found guilty of inciting terrorism were also found guilty last week of fraud and money laundering through online poker sites. According to a report in the Washington Times, investigators in the U.S. and Britain spent hundreds of hours tracking the three though the Internet, touching on thousands of merchants in many countries.
The men used more than 130 credit cards at 43 different online gambling websites...This is one of the first instances known where money laundering through online poker rooms has been documented.
As the article goes on to point out, online casinos "are not subject to the regulatory pressure that banks and other financial institutions are" so this sort of criminal activity is probably happening a lot more than folks realize. The problem of money laundering through gambling is not new and is one reason why traditional casinos are so tightly regulated. As a side note, the whole issue of regulating online gambling is a hot topic among the gaming industry crowd and its lobbyists.
Now, we know that McCain has a reputation for playing craps. The story floating around most recently cited in the New Yorker is just one of many over the last decade. For example, in 2005, Women's Wear Daily reported on the American Magazine Conference, held at the Wyndham El Conquistador in Fajardo, Puerto Rico that October. As part of his reporting on the conference, Jeff Bercovici wrote a column in which he gave out some admittedly tongue-in-cheek awards. Bercovici singled McCain out for an interesting award:
Second-Best Bill Clinton Impression: John McCain. In the middle of a two-hour gambling session, the Arizona senator introduced himself to an attractive young brunette and invited her to join him at the craps table. He soon declared the woman, who was attending the conference on behalf of a Rhode Island-based technology firm, to be his lucky charm, and forbade her to leave while his winning streak lasted.
So there is a record of at least one time when McCain was winning. But that was never reported in his tax returns for that year. Michael Kinsley, writing in Slate, also commented on McCain's gambling at the same convention where McCain spoke, reporting:
Journalists love him, of course. His frankness flatters us, and he flatters us more directly as well. Visiting a big convention of journalists last fall, McCain joined a group that was gambling at the hotel casino until the wee hours. In his speech the next morning, he cleverly nailed his audience and himself by declaring that he was happy to be among "my base."
In 2006, we have this report, complete with photo of McCain at a craps table in Las Vegas. Add the story of McCain's 14 hour sessions with lobbyist and former staffer, Wes Gullett, and the question about his declaring winnings or losings becomes increasingly relevant. After all, the gaming industry has a multi-billion dollar interest in the issue of online gambling. McCain, so far, has said he is not interested in regulating Internet gambling.
Let's run some numbers to demonstrate why this matters: As previously noted, John McCain goes to great lengths to present himself as a straight shooter. He claims his financial dealings are completely transparent and that he pays his own way. If you accept that at face value, then according to the tax records released so far, he has about $60-65,000 in "surplus income" when all is said and done.
JCHallman, a former craps dealer, recently wrote an excellent commentary about McCain, craps and the type of gambling going on. Based on his experience, JCHallman suggests that if McCain is running marathon sessions on the 15 dollar tabls on a regular basis, then he's easily betting thousands of dollars in each of these marathon sessions. Nobody plays for hours to break even, so he is either winning thousands or losing thousands in each of these sessions. The dollar volume is also consistent with anecdotes about McCain getting special high roller treatment. Nobody gets high roller treatment like McCain reportedly gets if they are not worth thousands of dollars to the casino. Finally, aides say McCain tends to play for a few thousand dollars at a time. That kind of money is not trivial.
So where is the money coming from? Let's first assume McCain is using his own money. That means he could easily be spending anywhere from 10-20 per cent of his "surplus income" shooting craps! That's a pretty hefty chunk of money -- especially if you aren't declaring anything on your taxes.
Given the company he was keeping in some of these early marathon sessions, it is entirely possible he was playing with other people's money. In that case, he still has to file some paperwork. And so do they. According to IRS form W-2G
Signature. You must sign Form W-2G if you are the only
person entitled to the winnings and the winnings are subject
to regular gambling withholding.
Other winners. Prepare Form 5754, Statement by Person(s)
Receiving Gambling Winnings, if another person is entitled to
any part of these winnings. Give Form 5754 to the payer.
If he is winning and not declaring -- that's a crime. If he is losing and not taking the deductions, that is peculiar for a lot of obvious reasons. It means he never wins. If he is losing his own money and not taking the deduction, it looks like he is trying to hide a problem. If he is losing other people's money that certainly raises questions about influence peddling if they have business in front of his committee. Whether he is winning or losing, it doesn't take a whole lot of imagination to see how a lobbyist bankrolling the senator's marathon craps session might be using this as a way of funnelling money into the senator's coffers without drawing attention to the transactions.
Finally, all this talk about unreported transactions raises raises more questions no one in the media will likely bother to ask: Has anyone seen Cindy McCain's tax returns? Does anyone know if she ever filed a 5754? Is he hiding his winnings on her tax forms? Is he burying his losses on her forms? With all the interest paid to Obama's mortgage payments, you would think something this glaring would get more media attention. Of course, then the press would have to get off the Lapdog Express and that wouldn't be any fun, would it?
UPDATE I -- here's the meme: