Yes, you are correct, that if your gambling losses equal your winnings you do not pay taxes. Except that in order to take the gambling loss you must be able to file a Schedule A (itemize) on your return. Gambling losses are reported on Schedule A under Other Itemized Deductions Line 16. To get the deduction for the gambling loss your itemized deductions much be more than the standard deduction.
If you are not able to itemize, you are not able to get credit for your gambling loss. Keep in mind that even though your losses most likely exceed your winnings, you can only claim the losses to the amount of your winnings. Gambling losses cannot exceed the winnings.
My guess is that if your tax obligation increases with each W-2G is because you are not able to deduct your losses.
