Earl Blumenauer Wants to Legalize and Tax Internet Gambling

5/30/10 - The Oregonian - View Source

By Charles Pope

It's not often that bow ties and Texas Hold Em' poker go together, but odd alliances form when a country is deep in debt and $40 billion (or more) is sitting right there on the table.

It's the reason Rep. Earl Blumenauer, D-Ore., not only believes gambling on the Internet should be legal, but the reason he has publicly and quite emphatically apologized for his vote in 2006 to make online gambling against the law.

"The more I looked at it, the more it was clear we couldn't stop it," Blumenauer said in an interview. "There's $100 billion a year (wagered) that is estimated, and it's increasing. It's all illegal and offshore and we can't stop it."

So why not legalize it so it can be regulated and taxed? He asks.

That idea is gaining currency as Congress once again considers a question that has been thoroughly drubbed in previous years. (The vote in 2006 to keep Internet gambling illegal passed 317-93, with 115 Democrats, including Blumenauer, voting for it.) This time, Blumenauer and his allies believe conditions are better and, yes, the odds much improved.

"It looks like, over the next 10 years, this is $40 billion that would go to the federal government for either worthy programs or deficit reduction," Blumenauer said. "So this seemed to me to just make sense -- to actually license and regulate it rather than driving it underground and offshore."

Beyond the money, legalizing online gambling would allow the government to step into a world that is now largely unregulated, with few checks for underage players, unscrupulous businesses practices, or identity theft.

No precise numbers exist for the number of Internet sites or the revenue of online gambling. A 2005 study by The American Gaming Association estimated 2,500 sites, with revenue growing by 20 percent a year.

"Although federal and state governments insist that online gambling is illegal, in reality it is thriving," the study concluded.

Congressional supporters of online gambling have a strategy that relies on two bills – one that would legalize online gambling and a second that would impose a federal tax on it. The tax measure had a hearing earlier this month in the House Ways and Means Committee. Blumenauer is a member. The legalization bill is likely to have a hearing in July before the House Financial Services Committee.

Not everyone on the committee will welcome the topic.

"If you are successful in creating a federal right to gamble on the Internet, we will create a generation of millions of Americans who from their youth will be addicted to Internet gambling and, therefore, life-long problem gamblers," said Rep. Spencer Bauchus, R-Ala., the ranking Republican on the Financial Services Committee and author of the 2006 law making online gambling illegal.

Blumenauer and his allies, which include Financial Services Committee Chairman Rep. Barney Frank, D-Mass., and Rep. Jim McDermott, D-Wash., concede that legalization won't come quickly. Opposition will be fierce.Rep. Bob Goodlatte, R-Va., is leading the opponents.

"People sometimes resort to drastic things when they are strapped for cash," he told the Ways and Means Committee on May 19. "However, it is unfathomable that Congress would consider legalizing a currently illegal activity that imposes harm on the most vulnerable members of our society just to raise money for more big government spending."

That point of view is reinforced by some powerful interest groups, including Focus on the Family.

"(Barney) Frank will continue to bark his libertarian mantra," the group said last week on its website. "'Gamblers have a right to gamble... it's not harming anyone else...Americans are going to be gambling on the Internet no matter what.'

"With oblivious statements like this, Barney Frank is either ignorant, naive or intentionally avoiding the truth... Gambling hurts millions!... What if Internet gambling remains illegal and 'goes underground'? Great! Eventually, these illegal businesses will either be caught -- and prosecuted -- or they will eventually dry up and go elsewhere."

Blumenauer believes those objections will fade with time, as budgets (both federal and state) tighten and the potential revenue from online gambling increases. He likens it to lotteries, which were hotly opposed for years but which today are accepted as a common and routine part of life in Oregon and 40 other states.

"This is emotional for some people. They just reflexively are against gambling," Blumenauer says. "But when people will take a step back and look at it, I think it is easier for them to be supportive."