New gambling legislation not player-friendly, but good first step

[iggs111]

What do you guys think of this? I think its bullshit. Why would the player have to pay up because the company isnt paying their fees?? That's ridiculous!!


A pair of US Senators from opposite sides of the Lower 48 have introduced a bill that could be a first step towards legalizing on-line gambling in the United States.

Senators Ron Wyden (D-OR) and Judd Gregg (R-NH) introduced the "Bipartisan Tax Fairness and Simplification Act of 2010" on February 23, 2010 in an attempt to legalize internet gambling. There are several interesting provisions.

First, it provides for the licensing of internet gambling companies. Each entity is required to pay a licensing fee of 2% of all player deposits, to be paid monthly. If a company fails to pay it, all wagers placed are then "unauthorized," and the bill provides for a penalty of 50% of all deposits.

There are several provisions that are player-unfriendly. First, if a player plays with a company that fails to pay the licensing fee, the player then owes the fee. For example, if a player deposits $1000 to an unlicensed internet sportsbook, that player now owes $20 to the general fund of the U.S. treasury.

Second, there is a "tax disclosure" section. Any licensed company must provide an end-of-year statement identifying each player, that player's net win/loss, his total deposits and withdrawals, and his beginning and year-end balances.

The proposed legislation could possibly generate a lot of revenue. According to the National Gambling Impact Study Commission, there are about $380 billion made per year in illegal wagers. If a typical internet bettor makes an average of $600 in bets per $100 deposited, the NGISC's numbers suggest there are over $60 billion in deposits per year. If the bill collected 100% of the fees on deposits, it would amount to over $1.2 billion in additional tax revenues per year.

Additionally, winning players would be forced to pay taxes on their winnings. There are many winning players, and I estimate that fewer than 10% of them pay taxes on their winnings. Of the $380 billion made in bets, internet sportsbooks hold a profit of about 1.5% of the action. This is a far cry below the theoretical hold of 4.5%; the difference is due to professional players.

If internet Sportsbooks win $17 billion a year from normal players, they probably lose $12 billion to professional players. If an additional $12 billion in income were reported, this might increase tax revenues another $2-$3 billion.

From the two additional sources of revenue, it is easy to see how the federal government could make another $4 billion a year in tax revenues from this bill. Additionally, the profitable gambling companies could be taxed on income as well.

Finally, these revenues are likely to grow as internet gambling expands, and the economy recovers. This proposal is a nice move in the direction of taxation and away from criminalization.