House considers legalizing online gambling

Posted by Emma Woollacott

Don't ban it, tax it: that was the message from supporters of internet gambling at a House panel meeting yesterday.

Senators Barney Frank and Jim McDermott told the panel that legalization could raise $42 billion in tax revenues over the next ten years.

This would come mainly from a tax on winnings, but would also include an eight percent tax on gambling deposits to be paid by the website operators.

Frank's bill aims to legalize online gambling, while McDermott's requires players to declare their winnings and pay tax. Both would apply to online poker, but not to most sporting events.

"We are sending a multi-billion dollar industry offshore and underground. As a result, we are making tax criminals of Americans who can't declare their online winnings to the IRS," McDermott told the House Ways and Means Committee.

Online gambling is big business in many parts of the world, but has been illegal in the US since 2006. The ban hit operators hard.

"Prohibition hasn't prevented the millions of Americans who want to gamble online from doing it," McDermott said. It's been estimated that illegal online gambling was worth as much as $5.8 billion in 2007.

Legalization is strongly opposed by conservative groups, but McDermott's bill contains a sweetener - a requirement for one quarter of the tax revenues to be given to foster care programs, early education and the arts.