Get ready to ante up to Congress

Internet gambling, which was dealt a body blow by the GOP-controlled Congress in late 2006, may be making a quiet comeback, thanks to the lure of tax revenues in an economy that is still struggling to regain its footing.

At least three bills have been introduced that would, to varying degrees, lift the virtual ban on Internet gambling that went into effect three years ago when former President George W. Bush signed into law the Unlawful Internet Gambling Enforcement Act (UNIGEA). None of the bills pending in the House and Senate have moved out of the committees to which they were assigned, and none has been scheduled for floor action. Still, prospects are brightening sufficiently to start a slight, but audible, buzz in the nation’s capitol.

For example, many expect hearings will be held this fall on at least one bill — Massachusetts Democrat Barney Frank’s “Internet Gambling Regulation and Taxation Act.” If so, it is likely that testimony in support of the legislation will be based as much on economics as on the principle that individuals should be able to gamble online if they want to. The economics of taxing Internet gambling are indeed impressive.

Online poker, for example, which is but one segment of the online gambling universe, accounts even now for some $6 billion per year just in the United States, according to the Poker Players Alliance (PPA). Globally, Internet gambling of all types will grow to a staggering $144 billion in revenue by 2011, according to estimates by PricewaterhouseCoopers.

Already, lawmakers like Frank are pitching their proposals as revenue “enhancers.” The lawmaker, who chairs the House Financial Service Committee and is a senior member of the Judiciary Committee, would accomplish this by imposing a 2 percent “licensing fee” on internet gambling deposits held by any Internet gambling company operating in the United States. That 2 percent tax alone would yield an estimated $51 billion in its first decade. Five billion dollars or more each year to a federal government starved for income to help balance a vast outflow of red ink is gaining the attention of lawmakers in Washington. This is happening despite continued opposition from the religious right, the NFL and other “hard sports,” the NCAA and many domestic casino operations. State government could also be expected to jump on the online gambling tax bandwagon.

Reportedly, even casinos that have in the past strongly opposed online gambling are starting to realize that if Internet gambling is even partially legalized, the entire gambling industry stands to profit. As noted by John Pappas, executive director of the PPA, in those countries in which online gambling is legal, many participants also place bets at “brick-and-mortar” casinos.

The focus on potential revenue from online gambling is entirely understandable when considering the almost desperate search by lawmakers in Washington to find new sources of income with which to fund its insatiable appetite for money. This process is also dictated because of the way in which the federal government has attacked gambling over the years.

The two primary weapons in the federal government’s war against Internet gambling are the 1961 “Wire Act” (which addresses telephone or telegraph-based gambling) and UNIGEA, which updates the 1961 law to include the more modern mode of communication. Neither statute outlaws gambling outright. Rather, the laws combine to make it illegal for businesses to transfer or retain funds derived from or related to gambling activities. Thus, to “legalize” online gambling, it becomes necessary to focus on the “money trail,” since that is where the federal law has directed its enforcement effort.

Moralists and business that see online gambling as competition can be expected to continue to oppose efforts to resuscitate the Internet gambling industry. The poor economy and profligate government spending, may have become their most serious adversaries.

33 comments Add your comment

clyde

September 21st, 2009
8:19 am

Internet gambling should be legalized and taxed heavily.Say 50% of winnings and no deductions for losses.Legalize only gambling within the confines of the country.Outlaw out of country betting.I need another tax that I won’t be paying.like the tobacco tax.And the tax on soft drinks.

yeah

September 21st, 2009
8:33 am

Do away with it and the Georgia Lottery. Kids do not even have schoolbooks while the lottery takes in millions.

Jim Callihan

September 21st, 2009
8:57 am

I am hedging a bet that the United States will be completely insolvent (unable to pay even the interest on the tens of trillions of congressional spending) before the next presidential election.

jconservative

September 21st, 2009
9:52 am

“…President George W. Bush signed into law the Unlawful Internet Gambling Enforcement Act (UNIGEA).”

This is one of the better examples of liberal legislation in recent years.

And I will be surprised if Mr. Barr is not correct on this – expect the tax to get approved.

boots

September 21st, 2009
9:57 am

The Lottery was intended to “enhance” the education budget, but instead, the budget is reduced and now depends on the millions created by the lottery — not as an enhancement, but to supplement what has been reduced in the budget.

Now, use your common sense, if you subtract the tens of millions of dollars generated by the lottery, how is this going to address the educational needs of the children of Georgia? Or, buy textbooks, if that is indeed the problem?

The pledge politicians make to never raise taxes is stupid, given the erosion of inflation over time, but it’s that populist BS that voters buy into that creates the need for a lottery. Politicians refuse to “man up” to the economic realities of the day, choosing rather to prostitute themselves to be re-elected.

Joan

September 21st, 2009
11:02 am

I would rather have them tax things I can live without, than increase the taxes on my income.

Scott

September 21st, 2009
11:15 am

When the internet gambling industry gets US regulation, I’d like to see strict rules on gaming odds. For example: Enforcing a Christian elected company that oversees and has 100% control of onling gambling gaming odds by way of the only allowed access to manipulate payout odds in software.

Chris Broe

September 21st, 2009
11:27 am

Today’s piece is entitled, “Virtual Gambling, the Christian Right, and other Solid Pairs”

or

Bob Barr is….RIGHT! This whole thing reminds me of why Las Vegas doesn’t have a major league baseball team: The umpires would keep getting ejected (and beat up) for counting balls and strikes, (and St Louis Cards).

Of course the next step after virtual gambling is virtual prostitution with all the sights, sounds, smells and feel of reality prostitution. Pocket-rocket scientists are working on the I-Pud, and that will be one time this happy camper will be in a tent outside of Target for when they open the doors on that premier!!

It is up to our congress, who represent the peoples of the United States of America, to pass this legislation. Yes, our congress, who, disguised as mild-mannered, metro-sexual christian males, fight a never ending battle for sooth(saying), caucus(stuffing) and the Amerian Ways (and Means).

If they lift the ban on internet gambling, will the phrase “One armed Bandit” become obsolete? What will replace the term “One Armed Bandit” I ask you good people? (The one-eyed mouse)

Another solid pair!

Mark

September 21st, 2009
11:28 am

Clyde, if you taxed winnings at 50%, then no one would gamble within the law, making the legalization of gambling pointless. Poker is all about calculating and maximizing your odds, and if you cut them in half, people would just play poker outside the law where they don’t have to worry about such an oppressive tax.

Saint Joan

September 21st, 2009
12:03 pm

“Oh please Brer Fox, whatever you do, please don’t throw me into the briar patch.”

joe matarotz

September 21st, 2009
12:10 pm

Bobolink, I do not gamble online or in person. How does this affect me?

William

September 21st, 2009
1:00 pm

Why are talking about ways for the government to take more money instead of government using less money. I say we do away with the special pay congress gets, special healthcare congress receives, and the special retirement of only eight years.

I can not believe there is not an outrage everytime the government wants to take money from wage earners. What is wrong with you people?
Where is your outrage?

William

September 21st, 2009
1:02 pm

These so called sin taxes should be levied against anyone liberal or registered with the democratic national party. Now that is a SIN!

Jefferson

September 21st, 2009
1:05 pm

The state of GA is missing a golden opportunity by not allowing casinos on Jekyl Island (only) in the state. MS was kicking butt in Biloxi until Katrina. What’s funny is the changing of the (somebody’s) morals when it comes to their own pocketbook. I wonder how many non smokers would like to make up the revenue if we just banned smoking completely, gov’t is just the middle man in the dope deal.

BigTimeBust

September 21st, 2009
1:05 pm

The only benefit of the lottery is lottery execs make millions. The educational system in Georgia is still a joke. Up in Wisconsin where I’m from, they spend money on schools and get results. I may move back next year!

dgroy

September 21st, 2009
4:21 pm

Hey “BigTimeBust”……take a few liberals with you.

TM

September 21st, 2009
4:51 pm

Well, the poker is not gambling, it poker. I was outraged at the UNIEGA passing, as it was backdoored into a port security bill, without really ever coming up into discussion, by a senator who took hundreds of thousands of dollars from the brick and mortar casinos in campaign donations. We need to make poker safe and regulated for our citizens who want to play poker online. The tax angle is the not the real issue, this issue is allowing our citizens to do what they please.

clyde

September 21st, 2009
5:01 pm

Mark,
The people who are going to gamble will gamble with A 50% taxation rate on their winnings.

Is it safe to say that the drought is over?

ugaaccountant

September 21st, 2009
6:05 pm

No, serious gamblers will absolutely not play with a 50% tax rate. They would never profit with that high of a tax.

clyde

September 21st, 2009
7:09 pm

Want to bet?

[...] (Get ready to ante up to Congress – The Barr Code) Share this story with others: [...]

edredneck

September 22nd, 2009
6:00 am

Let the nose of the camel into the tent, and soon you’ll be sleeping outside on the cold, cold, ground. Get one tax on the internet and they’ll tax everything they can, including free speech, printed and cyber. Wake up and smell the limburger cheese that emanates from DC.

Joseph Sanderson

September 22nd, 2009
7:32 am

It’s a good idea – billions of US tax dollars are now lost because people gamble outside the law. Legalize. Tax. Regulate.

And it’s not a “tax on the internet”, edredneck, it’s a tax on certain companies who do business on the internet, in the same way that physical casinos in Vegas or Atlantic City pay taxes.

Hopefully the current budgetary situation will lead to a few things:
1. Republicans will hopefully realize that you can’t cut taxes until you cut spending.
2. Democrats will hopefully realize that you can’t up spending until you up taxes.

Either way, for the past decade (essentially since Gingrich blocked Clinton’s spending and Clinton Gingrich’s tax cuts), both parties have been unsustainable. Either way, cut the populist crap about providing more for less tax $, and deal with it. Either up taxes or cut spending.

It seems remarkable that even now, the crazier side of the right wing is concentrating their slogans on cutting taxes more than cutting spending.

Taxed Enough Already? No.
Cut the Crap(py spending, earmarks, Murtha, etc.)? Yes.

The military appropriations are bloated by funds for pet projects (and for those of you who’ve watched ‘Charlie Wilson’s War’, think that but much less noble, but still controlled – as it was at the end of the movie – by John Murtha, possibly the single most corrupt politician in DC), transport appropriations by private airfields that are subsidized but used mostly by multimillionaires (or, of course, congressmen: see John Murtha Airport, one flight a day to Washington), and most other spending is wasted by being sent to campaign contributors rather than the people who need it.

If we cut all this crap, either we could cut taxes, or actually spend the money on more worthwhile things like teachers.

pd

September 22nd, 2009
3:09 pm

Sounds good to me. I think they should legalize gambling everywhere. They should also stop prosecuting drug users and sellers. They shoudl legalize prostitution as well. Regulate it and tax it.

And I would be all for having a “Public Option” in these areas as well. We already have the public option on gambling and it can easily exist side by side with private casinos and internet sites.

We could have “Public Option” for prostitutes and drugs too

BadgerDawg

September 22nd, 2009
6:35 pm

I support a 50% tax on people named Clyde.

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]

DirtyP

September 25th, 2009
11:32 am

Joseph Sanderson’s comment has this 100% right. Legalize it. Tax it. Regulate it. It makes absolutely no sense to have legalized gambling in casinos while having internet gambling illegal, especially poker. This is a no-brainer here!

SCD

September 25th, 2009
4:26 pm

For many people who have not researched this issue, the knee-jerk reaction is to condemn internet gambling. I’d strongly suggest that you take the time and research the issue before offering an opinion. There have been many studies on this, particularly overseas, where they have legalized, regulated, and taxed gambling industries. Each of these studies comes back as saying that regulating and taxing online gambling does not increase gambling addiction at all. Britain conducted a study in 1997 measuring gambling addiction and again in 2007 (after the online gambling boom) and found no measurable impact in gambling addiction. Other studies have come back with similar results. The only studies that have said otherwise are ones based in Canada or the U.S., which are based on opinion and projections, not actual data.

I for one am tired of the deficits and spending going on with this corrupt government, along with the rising deficit thats going to haunt my children. If we can get another income tax stream from something thats going to have no impact on me, then I’m all for it.

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]

[...] Monday, Barr published the latest installment of “The Barr Code,” his weekly column in the Atlanta Journal-Constitution.  The entry, entitled “Get [...]