The online site MotleyFool.com is once again taking on the subject of online poker and its regulation by the federal government, this time taking a look at whether it will have an impact on the stalled “fiscal cliff” negotiations between Congress and the White House.
Writer Travis Hoium opines about the subject in an article entitled “Could Online Poker Help Avert the Fiscal Cliff” on the pages of the Motley Fool, opening his case by saying about online poker, “Consider that there’s one easy revenue source that the federal government could add to any bill.” He correctly states at the beginning of the piece that the current stance of the Department of Justice is that online poker is legal if the states allow it (after their December 2011 edict) but adds that, at the moment, there are few states making that move.
Hoium points out the moves by Nevada to open up an intra-state online poker network and its ongoing licensing procedures. In making that statement, however, Hoium also notes that several of the companies that are applying for those Nevada licenses, such as MGM Resorts, Caesars Entertainment, Boyd Gaming and the Golden Nugget (among others), would much rather see action on the federal front rather than at the state level.
Where Hoium starts to make some bold assertions is in regard to other states that may get into the intra-state game. “It won’t be long before New Jersey, California, Iowa and others join in the fray,” he writes. At this time, legislation for online poker’s regulation has stalled in California and New Jersey, while Iowa has declined to act. He is correct in his statement that, if these and other states move forward without the federal government, then the pressure to act would be put on Congress and the Obama administration.
Hoium also takes a huge leap in that online poker could help to “bridge the gap” an effectively have an impact on the “fiscal cliff” negotiations. Hoium notes the Unlawful Internet Gaming Enforcement Act (UIGEA) was slipped in as a “rider” to a national security bill in 2006 and he believes that this is the path to take with current online poker regulation. “Right now we have multiple bills (in fact, there is only one, Rep. Joe Barton’s bill in the House; the Reid/Kyl bill in the Senate has yet to be introduced) that would regulate online poker floating around the halls of Congress,” he writes, “and it is not inconceivable that one of these could be slipped into a more comprehensive budget plan relating to the fiscal cliff.”
Hoium believes that, although a “few billion dollars of revenue over ten years from online gaming may not make a deal possible,” it could be something that Congressmen tap into for negotiations on raising revenues instead of raising taxes on the population.
It is estimated by the American Gaming Association that approximately $4 billion per year is wagered on offshore sites, which includes poker but also includes other casino gaming such as slots, roulette, blackjack and other games. Some estimates have gone as high as $10 billion per year when looking at the online gaming industry but, even over a decade, this amount of revenue wouldn’t put a dent in any fiscal issues that the United States faces. This is the problem that states are seeing is that, after initial licensing, not enough revenue would be generated to solve financial problems.
Even if there is talk of between $40 billion and $100 billion over a decade, there is also the issue of taxation on those revenues. Current corporate tax rates are around 35%; with that in mind, only $14 billion to $35 billion would be raised through said taxes over a ten year span, although more revenue would come in from potential players. The potential taxation revenue from online gaming (as a whole, not just online poker) would be but a drop in the bucket compared to a multi-trillion dollar debt the U. S. government currently finds itself in, although it would be an increase in revenues that doesn’t go through taxing the American public itself.
Hoium’s article doesn’t make any statements regarding the potential of online poker’s regulation in either direction and there is little to get excited about currently in the halls of Congress. Negotiations regarding the “fiscal cliff” have bogged down and even Senators Reid and Kyl have admitted that there are more pertinent issues to get to during the “lame duck” session rather than pushing for passage of online poker regulation in 2012.