I understand their logic. It's a holdover from a 100% B&M world where the vast majority of people who went to casinos never reported their winnings either out of ignorance of the law or from the simple logic of "no paper trail".
Since the IRS' job has always been to get the money, they created rules that were punitive to the honest because there was no way to catch the rest.
Couple that with the schizo American culture - obvious freedom combined with a puritanical undertone - and you have a nation with the lowest tax rates of the industrialized world combined with the most Draconian tax enforcement.
Welcome to the monkey house.
