Internet Gambling Tax Bill Hearing

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Representative Jim McDermott’s bill HR 4976 that seeks to tax Internet gambling was heard in the House Ways and Means Committee on May 19. The bill is known as Internet Gambling Regulation and Tax Enforcement Act of 2010.

John Pappas, Executive Director of the Poker Players Alliance (PPA), spoke in favor of the bill. He said that consumer protection and additional tax revenue were the reasons for seeing the bill through. He pointed out that the proposed tax would not levy any burden on online gamblers, but would be borne by the operators. Players would have to pay income tax on their winnings. He proposed amending the clause that would fine online gamblers who wagered at unlicensed sites.

Congressman Barney Frank confirmed that he would bring his bill HR 2267 before the House Financial Services Committee in July. He focused on the right of adults to decide whether they should gamble. He was sure that the banks would object loudly at having to police the online gambling industry when the UIGEA rules would become effective next month.

Representative Jim McDermott, the sponsor of the bill, was the most effective speaker. He said that American players gamble on the Internet even though the government holds it illegal. They generate about $5 billion for offshore operators. If this money remained within the country it could create thousands of jobs at the licensed gambling sites. McDermott said, "Regulation and taxation have proven to be a better policy for our country when it comes to alcohol. The same is true for online gambling." I think it’s time for Congress to stop pretending that the future won’t come. McDermott provided details of the estimated tax revenue that would accrue from the different provisions of the bill. He also explained how the states and tribes would get a share of this tax.

There were plenty of negatives as well. Californian Republican Representative Wally Herger said, "It’s pretty clear to me that Congress is not about to legalize, let alone legalize and tax Internet gambling. There are far more pressing issues we should be focused on." Virginia Republican Representative Bob Goodlatte pointed out that almost all the attorney generals in the past have opposed the legalization of online gambling. Democratic Representative Shelley Berkley from Nevada had recently thrown her weight behind the legalization of online gambling. However she opposed the taxation proposed in HR 4976. She said that the issue of taxation and legalization were separate and distinct.

The biggest victory for the proponents of online gambling came when the Oregon Republican Representative, Earl Blumenauer, renounced his stand against online gambling. Blumenauer had voted for the UIGEA in 2006, but now became the 70th co-sponsor of Barney Frank’s HR 2267.

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