Internet Gambling Discussed in House Ways and Means Committee

 

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In recent days, HR 4976, the Internet Gambling Regulation and Tax Enforcement Act, was discussed in the House Ways and Means Committee on Capitol Hill in the United States. The bill, introduced by Congressman Jim McDermott (D-MA) in March, seeks to extract tax revenue from licensed internet gambling operators. More than $70 billion over a 10-year period could be raised, yet the measure has only received four co-sponsors and is not scheduled for markup.

Two witness panels took to the floor of the Ways and Means Committee. The first consisted of three Congressmen: Barney Frank (D-MA), McDermott, and Unlawful Internet Gambling Enforcement Act (UIGEA) supporter Bob Goodlatte (R-VA). Frank kicked off the hearing by telling his peers, “We know that gambling will go on in America. The question is should we continue to give those who gamble the complete immunity from taxation?” Frank noted that teacher layoffs, for example, could be avoided with the extra revenue raised.

McDermott revealed that licensing and regulating internet gambling could result in 32,000 jobs being created, an important benefit considering the vast unemployment in today’s economy. He added, “Despite current U.S. laws aimed at preventing gambling, every day millions of Americans gamble on the internet. It has forced internet gambling operators to work offshore, has put consumers at risk, and has sent billions in revenue to foreign nations.” The bill taxes operators based on player deposits, a cost that cannot be assessed directly to the consumer.

Goodlatte was one of the driving forces behind the UIGEA’s passage four years ago. However, he told the Ways and Means Committee that he opposes internet gambling expansion partly because of his dedication to states’ rights: “I do not support legalizing any forms of internet gambling. I do not support interfering with the states to decide what is legal. The Congress should continue to respect the rights of the states to regulate gambling and do so in the manner they see fit.” Two states – Utah and Hawaii – do not have any forms of legalized gambling. Options in other states range from lotteries to full-scale brick and mortar casinos.

A variety of lawmakers pitched questions to the three-man panel, including Charles Rangel (D-NY), Lloyd Doggett (D-TX), Earl Pomeroy (D-ND), Shelley Berkley (D-NV), Devin Nunes (R-CA), Dave Reichert (R-WA), and Dean Heller (R-NV). The latter harped on the decision by McDermott to institute a tax on deposits. McDermott responded by saying that existing internet gambling operators “weren’t opposed to this.”

Christopher Wagner of the Internal Revenue Service (IRS) and Charles Steele of the Financial Crimes Enforcement Network then took to the floor for the hearing’s second panel. Berkley asked Wagner what the impact of legalizing internet gambling would be on the IRS, which would be charged with collecting the appropriate taxes. Wagner responded, “We don’t know what the resource computation would be. Right now, we know that a lot of the regulating we do today is for legal gambling. [Therefore,] we do not see a significant change.”

In the background of the hearing was the quickly approaching deadline for industry compliance with the regulations of the UIGEA on June 1st. The UIGEA impedes transfers from banks and other financial institutions to “unlawful internet gambling” sites, but does not specify what the three-word phrase means. Instead, banks are left to wade through a muddled mess of federal, state, local, and tribal laws to determine what is legal.

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