Casino winnings is considered a source of income and therefore taxable. The person choosing to continue gambling with that income and perhaps losing it, is not relevant as far as the IRS is concerned, and gambling winnings tax is to be paid.

Moreover, your getting ahead of yourself in the accounting….if you sit and the table and lose….you don’t have to have any tax withheld as you won’t pay any. And if you win one day, and lose the next, the amount of the loss IS able to be taken against the income from the winnings…so you don’t pay tax only on winnings…but NET winnings.