On Wednesday, the House Ways and Means Committee hosted a hearing discussing tax proposals related to internet gambling. Taking center stage was Congressman Jim McDermott’s (D-WA) HR 4976, the Internet Gambling Regulation and Tax Enforcement Act. The measure calls for a 2% federal tax and 6% state tax on internet gambling deposits, which could amount to as much as $72 billion over a 10-year period.
Online poker players and internet gamblers tuned into Wednesday’s proceedings with wide eyes. Curiously, no representatives from the banking or internet gambling industries, the two groups most affected by the Unlawful Internet Gambling Enforcement Act (UIGEA), were present at Wednesday’s hearing as witnesses. Instead, Congressmen Barney Frank (D-MA), Bob Goodlatte (R-VA), and McDermott comprised one panel. Making up a second panel were representatives from the Treasury and Internal Revenue Service (IRS).
Skeptical of the effectiveness of the hearing was Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan, who told Poker News Daily, “Nothing happened. It was yet again another opportunity for sides that have already been heard to make a public airing of what their position was and for the IRS to come down and say they can tax and investigate internet gambling.” No markup occurred and no follow-up meeting of the Ways and Means Committee was scheduled. Moreover, the Ranking Member of the minority was not in attendance.
A portion of the hearing focused on the 32,000 jobs that could be created by legalizing and regulating internet gambling in the United States. Many states have unemployment rates above 10%, leading to Safe and Secure Internet Gambling Initiative (SSIGI) spokesperson Michael Waxman commenting in a press release, “Today’s witnesses clearly articulated why Congress should give fair consideration to regulating online gambling activity as a way to protect Americans, stimulate the economy by creating tens of thousands of new jobs, and profit from the collection of tens of billions of otherwise lost revenue.”
One of the major takeaways this author had of the hearing was that it was largely void of moral arguments for or against internet gambling. Images of kids losing their parents’ houses while gambling online have permeated discussion in the House Financial Services Committee, but largely did not occur yesterday. Goodlatte was one of the only Congressman to trumpet the moral pitfalls of legalizing the industry.
Poker Players Alliance (PPA) Executive Director John Pappas, whose organization has been instrumental in scheduling committee hearings, gave Poker News Daily his take on Wednesday’s events: “I thought it went fairly well. There’s some debate that needs to be had on what the tax structure ought to look like and that’s positive debate. Aside from Goodlatte, you didn’t see the type of demagoguery that we’ve seen in other committees. To his credit, I thought Goodlatte did a good job of defending his position.”
The two-and-a-half hour marathon featured a bevy of members of the Ways and Means Committee weighing in on the bill’s tax framework, IRS burden, and impact on Indian tribes. Pappas told Poker News Daily that he was elated to see a high level of interaction among Ways and Means Committee members: “I was surprised that there was so much back and forth on the members’ panel. There was some legitimate discussion raised there.”
The financial services industry in the United States must fall into full compliance with the regulations of the UIGEA by June 1st. What the landscape of the internet gambling industry will be following that date is anyone’s guess.
If you missed any of Wednesday’s hearing, visit the official website of the PPA, which features video clips of opening statements.
