Congressman Jim McDermott Writes for Online Gambling Regulation

Congressman Jim McDermott, a member of the Committee on Ways and Means, wrote a letter to his fellow congressmen urging them to cosponsor his bill H.R. 2607, the Internet Gambling Regulation and Tax Enforcement Act.

In his letter, Congressman McDermott says,

“Because online gambling is illegal, U.S. taxpayers do not report their winnings to the IRS, costing the U.S. treasury billions of dollars in uncollected revenue. Instead of this ineffective attempt to prevent adults from gambling over the Internet, we need a more sensible approach to protect consumers and ensure that revenues that now flow offshore stay here in the U.S. and are therefore subject to taxation. H.R. 2607 and H.R. 2046 would regulate Internet gambling to make it safe for American consumers, and ensure that tax revenue that is currently forgone is collected.”

H.R. 2046 is the legislation that has been introduced by Representative Barney Frank. This legislation, the Internet Gambling Regulation and Enforcement Act (IGREA), would allow Americans to gamble online with property licensed operators and establish regulations for those companies.

PriceWaterhouseCoopers, on December 6, 2007, did a study for the UC group called Estimate of Federal Revenue Effect of Proposal to Regulate and Tax Online-Gambling. The UC group was founded in 1999, and according to their website:

“UC improves the quality and efficiency of payment processing and logistics for online product and service providers. UC group, in partnership with Baker Tilly provides a fully outsourced back-office and treasury solution to e-commerce businesses. ”

In this study, PriceWaterhouseCoopers found that in the fiscal period from 2008 to 2017, the federal revenue effect of H.R. 2046 and H.R. 2607 would be estimated to range from $8.7 billion to $17.6 billion. It further breaks down the revenue to say that 56% will be attributable to individual income taxes, 22% is due to the wagering tax, 18% is due to the licensing fee and 4% is due to corporate income tax.

The study also points out that, “legislation could increase federal revenues by as much as $42.8 billion over the 2008 to 2017 period in the event that no sports leagues or states opted out of the regulatory regime.”

“To be clear, these are not mostly new taxes – the bulk of the revenues generated would come from taxes required under existing law,” McDermott said in his letter, “this is simply a framework to collect taxes on existing activity that is currently unregulated, unsupervised, and underground.”

Read McDermott’s letter to Congress. (.pdf)

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