Protect Online Gamblers, Collect Tax Revenues
3/11/08 - The Hill - View Source
By Rep. Jim McDermott (D-Wash.)
As members of Congress, we have a duty and responsibility to act in the best interests of the American people. That’s the outcome I see with passage of new legislation that I introduced as a companion bill to Rep. Barney Frank’s (D-Mass.) proposal regarding Internet gambling.
Today, countless Americans are wagering online — but offshore, because Congress made Internet gambling illegal just a couple of years ago, with virtually no debate or hearings. The net result is that Americans have no protection when they wager online and Americans are vulnerable to scams and unscrupulous operators. I think Congress should do something about that.
We all recognize that the Internet presents emerging opportunities in commerce and entertainment, but we also know there are dangers lurking online. That’s why we have taken thoughtful steps in recent years to bring a delicate measure of regulation to online activities in order to protect the American people.
What’s more, the U.S. Treasury is losing billions in revenue every year from offshore gambling because we cannot enforce existing tax laws. In good economic times we might see that as an unfortunate oversight, but in bad economic times, like now, we should see it as totally unacceptable.
H.R. 2607, the Internet Gambling Regulation and Tax Enforcement Act, would protect Americans even as it restores tax fairness. Currently, all of the legal online gambling companies are based outside the U.S. and thus are not subject to U.S. taxation. Under my proposal, however, a condition to be licensed to conduct business in the U.S. would be a requirement that each licensee submit to U.S. jurisdiction to ensure the ability of the U.S. to enforce payment of all taxes due — including state taxes, generating new revenues for any state that chooses to allow Internet gambling under the federal license.
Preliminary revenue estimates prepared by the respected accounting firm PricewaterhouseCoopers indicate that regulating Internet gambling could generate between $3.1 billion and $15.2 billion in federal revenues during the first five years, and between $8.7 billion and $42.8 billion over the first 10 years. Additional revenue to the federal government would come from income tax on the operators’ profits and on the winnings of individual gamblers.
Interestingly enough, experts who have looked at the type of protections against compulsive gambling and underage gambling incorporated in the proposed legislation have concluded that they would be more stringent than those currently in place for brick-and-mortar casinos.
Further, our current prohibition on Internet gambling has placed us in the middle of a trade dispute with the World Trade Organization. Several nations that allow Internet gambling argue that our inflexible stance infringes on free trade, and they now are seeking legal remedies to force us to change course.
Prohibition in various guises has failed before and is failing once again. Americans are gambling online today, but more than money is being wagered because they are gambling in an unprotected, unregulated and largely unknown world. We should regulate Internet gambling to protect the American people and rightfully collect billions in lost tax revenue that could help us fund important programs that benefit people.
We have an opportunity to correct a legislative misstep and to simultaneously fund programs important to all of us. Let’s seize this opportunity.