It’s always intrigued me as to why prizemoney tallies are quoted so extensively in the poker media (and I’m just as guilty as anyone). For the most part, they’re complete bollocks. Indeed, the higher the prize, the more inaccurate it’s likely to be.
There are two main reasons – in the vast majority of big buy-in tournaments (it would have to be in the order of 70-80 per cent), players make a deal. Generally this will mean the winner takes home less than the quoted first prize, and other players more than officially listed.
Secondly, players sell shares, or may have backers who expect a slice of the pie. Again, the bigger the buy-in, the more likely that a player has sold off a few points to friends or backers.
All of which makes the story of the new WSOP Main Event champion Pius Heinz all the more incredible. According to my sums, Heinz has just pocketed the largest poker tournament prize in history in terms of his actual net payout.
According to accountant Russ Fox, Heinz benefits from the US-Germany Tax Treaty. Under that Treaty, gambling income earned in the US is exempt from US taxation. “Without a tax treaty, he’d lose 30 per cent of his winnings to the IRS. Next, Germany considers gambling to be a use of after-tax (earned) money so for gamblers it’s tax-free. Thus, Mr Heinz gets to keep all USD $8,715,638 of his winnings,” Fox said.
A few calls and emails also revealed that Heinz has sold off a maximum of 30 per cent of his action, reducing his windfall to USD $6,100,946.60, but still fairly tasty. And to the best of our knowledge, there was no deal made at any point of the WSOP Main Event final table, leaving Heinz with arguably the greatest payday in poker history.
In the modern era of massive WSOP Main Event payouts dating back to Greg Raymer in 2004, Heinz is the first to completely escape the grasp of the taxman. Even our own WSOP champion Joe Hachem forfeited 30 per cent of his USD $7.5 million to the IRS. The USA has no greater friend in the world than Australia, but that friendship isn’t worth a lousy tax treaty it would seem.
To put Heinz’s good fortune in perspective, let’s look at the case of third-place finisher Ben Lamb. His official payout of USD $4,021,038 was immediately slashed by more than USD $1.5 million to the IRS, and a further $240,268 to the Oklahoma State Tax Commission. That means Lamb has forked out 43.9 per cent of his winnings, before paying any of the players who had shares in him for the Main Event. In the words of Austin Powers, “Ouch, baby. Very ouch.”
The case of Irishman Eoghan O’Dea and his prize of USD $1,720,831 is also intriguing. Russ Fox told us that gambling income for Irish citizens is also exempt from US taxation. However, gambling income in Ireland is taxable for professionals (there is no tax for amateurs). O’Dea, a professional gambler, is subject to a tax rate of 20 per cent on his first €36,400; the tax rate is 41 per cent thereafter so he will owe $695,018 to the Office of Revenue Commissioners (40 per cent).
So of the USD $28,279,219 awarded at the 2011 WSOP Main Event final table, the take for the taxman is USD $5,438,038 or 18.91 per cent. That’s more than half of the 42.99 per cent paid in taxes among the nine players at last year’s final table. Or to put it into perspective, the taxman actually finished second to Heinz in this year’s WSOP Main Event, based on payouts.
In one form or another, the house always wins.