Red tape indicators: sports betting, R&D and click-to-cancel

NPR.

This is the indicator from Planet Money.

I'm Adrienne Ma.

And I'm Waylon Wong.

Joining us today is.

Waylon, what is that sound?

I don't know.

It sounds like something or someone crashing through the underbrush.

Is that Jeff Guo of Planet Money?

Guys, it's not me.

I'm pretty sure.

It's the tempestuous beast known as Indicators of the Week.

Oh, few.

Sorry for the case of mistaken identity, Jeff.

Don't worry about it.

It happens all the time.

On this episode of Indicators of the Week, we are taking on one of the most unstoppable forces in the economy.

It's got a huge footprint.

Talking about the government.

The apex predator of the economy for some people, perhaps.

So today, we'll be digging into why professional gamblers are worried about extinction, why businesses might start investing more in research and development, like cloning dinosaurs, and why it may stay difficult to cancel your subscriptions.

Hold on to your butts.

It's after the break.

This message comes from NPR sponsor, Capella University.

Interested in a quality online education?

Capella is accredited by the Higher Learning Commission.

A different future is closer than you think with Capella University.

Learn more at capella.edu.

This message comes from Schwab.

Everyone has moments when they could have done better.

Same goes for where you invest.

Level up and invest smarter with Schwab.

Get market insights, education, and human help when you need it.

This message comes from Apple Card.

Each Apple product, like the iPhone, is thoughtfully developed by skilled designers.

The titanium Apple Card is no different.

It's laser-etched, has no numbers, and rewards you with daily cash on everything you buy, including 3% back at Apple.

Apply for Apple Card in minutes.

Subject to credit approval, AppleCard is issued by Goldman Sachs Bank USA, Salt Lake City Branch, terms and more at AppleCard.com.

This message comes from Instacart.

Did you see the game last night?

Of course you did, because you used Instacart to do your grocery restock.

Plus, you got snacks for the game, all without missing a single play.

And that's multitasking.

So Instacart isn't saying it's a hack for game day, but it might be the ultimate play this football season.

Enjoy $0 delivery fees on your first three orders.

Service fees apply.

Valid on three orders within 14 days.

Excludes restaurants.

Instacart, we're here.

My indicator is 90%.

This refers to the percentage of gambling losses that people are able to deduct.

Yeah, this is news you can use.

There is a tax deduction for the money you lose when you're gambling.

Yes.

And you used to be able to deduct 100% of your losses against what you gained.

So essentially, Uncle Sam, aka the taxpayers, have been supplementing their risk with 100% deduction.

Right, but that deduction got lowered to 90% under the big tax and spending bill that President Trump just signed.

And this change in the tax code is causing quite a stir in the gambling world, especially especially among professionals.

I am not an experienced gambler myself, but I guess I don't really understand what the big deal is here.

Yes, but here's a hypothetical that kind of lays out what people are getting upset about.

Okay.

So let's say you won $100,000 in a year, and that same year you also lost $100,000.

Right.

So you netted zero.

Exactly.

Under the old tax code, you could deduct all of your losses, $100,000.

So you would net out at zero taxable gambling income.

Now, with this change in the law, you can only deduct 90% of your losses.

So that's $90,000.

Deduct those $90,000 from your winnings of $100K, and that leaves you with $10,000.

You will now be taxed on those $10,000.

Okay, but that's even though I didn't make any money gambling for the year.

Yeah, so gamblers say it's like you're being taxed on money that that you didn't take home.

You can see why this is making waves in that community.

One professional poker player said on social media that, quote, you can't be a professional gambler in the U.S.

if this goes through.

And I imagine this is affecting a lot of people, right?

Because gambling and sports betting have become such big things in the U.S.

over the past couple years.

Yeah, there is definitely pushback.

And one Democratic congresswoman from Nevada has already introduced a bill that will restore the old deduction of 100%.

She said if the lower lower deduction stays in place, gamblers will end up using unregulated platforms or they'll just stop reporting their winnings.

Thank you very much.

But first, I just got to go call my bookie.

You're like, I have a crisis.

Actually, my indicator is also tax-related.

It is 174, as in section 174 of the U.S.

tax code.

Ooh, throwing those sights at us.

See what I did there?

Bending the indicator of the weak rules a little bit, but this has to do with the one big beautiful bill act President Trump signed into law on July 4th.

And as we parse out the different facets of this bill, one relatively obscure one that caught my eye this week that I'd argue is actually pretty important has to do with section 174 of the tax code.

So this is a tax law that goes back decades.

And what it does is allow companies to fully deduct research and development costs they incur in a given year.

So hypothetically, if you are a company that makes cat toys, let's say, I'm looking at you, Jeff.

Ooh, yeah.

And let's say you spend a thousand bucks developing these cat toys.

You know, you make prototypes, you pay wranglers to bring in all the cats to test them.

You convene the focus groups of cats.

You pay the cats, of course.

And you rack up a thousand bucks in research expenses.

You could deduct that thousand bucks from your taxable income that year.

But this law was changed during the first Trump administration when Republicans passed the Tax Cuts and Jobs Act.

Basically, when they were trying to get it through, they were figuring out how they can pay for the bill.

And they said starting in 2022, companies could no longer immediately deduct all their RD expenditures in a given year.

I'm sure they were not thrilled with that.

And instead, they would have to amortize or spread them out over several years.

And so that means that a company that used to deduct 100% of their research costs upfront each year could now only deduct like 20% of it.

And this was like a huge deal, right?

Like it made the cost of research and development for companies just a lot more than it used to be.

Yes.

A lot of people in sectors like the tech industry kind of freaked out about it.

And some have suggested that is one of the reasons the tech industry has laid off so many people in the past couple of years.

So what you have is like a pretty negative impact on some businesses, which is probably why Republicans this time around with the Big Beautiful bill decided to restore the rule that allowed full deductions.

So it went from like 20% each year back to 100%.

Yes.

The tax code giveth and the tax code taketh away.

That was the lesson of my indicator.

It's also the lesson of your indicator, Adrian.

That is correct.

Jeff, what's your indicator of the week?

All right.

So my indicator of the week has to do with something else having to do with the government that we've talked about on the show.

It's called the click to cancel rule.

It was this new regulation from the Federal Trade Commission that was supposed to make it easier to cancel your subscription services.

I remember this.

Yep.

Right?

So, if you were able just to sign up for something really easily by like clicking something on a website, they wanted to make it just as easy to cancel that thing.

Like, you don't have to call someone on the phone or whatever.

So, this was a pretty big deal.

And this new regulation, it was supposed to take effect next Monday.

However, just this week, a federal court struck down the rule.

So as of now, Click to Cancel is no more.

It's gone.

Oh, we were so close.

Just like that?

Yeah.

So what was the rationale?

Yeah.

Okay.

So the funny thing is the court didn't have a problem with the regulation itself.

The court had a problem with how the FTC created the regulation.

Oh, so it's like a procedural thing?

Yeah, they didn't follow the right rules to make this rule.

Oh, no.

So I know.

So when government agencies make new regulations, right, there's usually this whole choreography.

You have to publish a draft of the regulation.

You have to collect public feedback.

Sometimes you hold public hearings.

And for this regulation specifically, one of the rules was that the FTC was supposed to publish a report, looking at the costs and benefits of the rule and analyzing possible alternatives.

In fact, they were supposed to publish two versions of that report, a preliminary analysis for the public to digest and comment on, and then a final analysis.

But in this case, the problem is that the FTC only published the final report, not the draft.

Oh my gosh.

This is so like arcane.

Yeah, right.

So they were working on this for literally years.

Yes.

And then it all just went away because they didn't file a preliminary report.

Yes, exactly.

I think that this whole saga, what it shows you, is just how difficult it is sometimes for government agencies to make changes to regulations.

There are just a lot of hoops they have to jump through.

And, you know, that is intentional.

Those rules are there to make sure that the public gets a say in what government agencies do.

I mean, that does make sense, right?

Like having public comment and the opportunity to digest information and say your piece.

Yeah.

Although it might be more efficient if they had like a click to make a rule rule.

No, that takes us down the road to tyranny, Adrian.

But anyway, the FTC, they can bring back the click-to-cancel rule.

They just have to follow all the rules this time.

Well, sounds like click-to-cancel Cancel is going the way of the dinosaurs.

Well, they could always bring it back, actually.

Just like in the Jurassic Park series, they just keep bringing the dinosaurs back.

Just make sure you follow the rules this time.

They always do in the movies, right?

Everything always goes so great.

This episode was produced by Cooper Katz McKim and engineered by Jimmy Keely.

It was fact-checked by Cier Juarez, Kevin Cannon is our editor, and the indicators are production of NPR.

This message comes from NPR sponsor Charles Schwab with its original podcast On Investing.

Each week, you'll get thoughtful, in-depth analysis of both the stock and the bond markets.

Listen today and subscribe at schwab.com slash on investing or wherever you get your podcasts.

This message comes from LinkedIn Ads.

One of the hardest parts about B2B marketing is reaching the right audience.

That's why you need LinkedIn ads.

You can target your buyers by job title, company, role, seniority, and skills.

All the professionals you need to reach in one place.

Get a $250 credit on your campaign so you can try it yourself.

Just go to linkedin.com slash results.

That's linkedin.com slash results.

Terms and conditions apply.

Only on LinkedIn ads.

This message comes from Shipbob.

Power your operations and accelerate growth with ShipBob Plus, the greatest fulfillment ally for brands scaling to billions in sales across infrastructure, software, and continuous optimization.

With ShipBob Plus, enjoy benefits like discounted shipping, custom reporting, accelerated receiving times, and direct relationships with ShipBob's team of experts, all designed to help you go from millions to billions in sales.

Go to shipbob.com/slash plus for a free quote.