Study Reveals U.S. Could Make Billions in Online Gambling Taxes

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congress.jpgA study performed by Price Waterhouse Coopers has determined that if two online gambling bills currently in the U.S. Legislature were to pass, up to $17.6 billion in taxes over the next ten years could be generated for collection by the U.S. government. The two bills are Representative Barney Frank’s (D-MA) Internet Gambling Regulation and Enforcement Act of 2007 and Representative Jim McDermott’s (D-WA) Internet Gambling Regulation and Tax Enforcement Act. The two bills are still in committee, but have been generating a large buzz in the online poker world. Barney Frank’s bill was introduced in April 2007, has forty-five co-sponsors and is currently in the House Subcommittee on Commerce, Trade, and Consumer Protection, while Jim McDermott’s bills was introduced in June 2007, has one co-sponsor, and is currently in the House Committee on Ways and Means.

The taxes generated from these bills would not come from any new tax, but simply applying taxes to internet gambling, which is currently unregulated. Approximately 56% of the taxes would come from individual income taxes while 22% would come from a wagering tax, 18% from licensing, and 4% from corporate income tax. The estimate of $17.6 billion assumes that all states that allow land-based gambling would allow online gambling (states can still choose whether or not to allow online gambling). The low end of the estimate is that $8.7 billion would be generated in taxes, this number assuming that the ten states that currently have laws banning online gambling would continue enforcing their bans. The ten states that currently restrict online gambling in some way are Illinois, Indiana, Louisiana, Michigan, Nevada, New Jersey, New York, Oregon, South Dakota, and Washington. The estimates could rise even higher in the unlikely case that all states allow online gambling, as the revenue would jump to $33.9 billion.

Sports wagering has also been taken into consideration. If all states that allow land-based casinos allowed sports wagering, except for the ten that already ban online gambling, tax revenues would rise another $10.2 billion. If the ten states that do ban online gambling were to be included, the tax revenues would rise by $21.4 billion, and if all states were to allow sports wagering then the tax revenues would increase by $42.8 billion.

The PWC study has been revealed as pressure continues to mount on the federal government to regulate and tax online gambling instead of trying to ban it by preventing U.S. citizens from transferring their money into gambling sites, as the government is attempting to do under the Unlawful Internet Gambling and Enforcement Act, which was passed in 2006. The U.S. is also facing pressure from foreign countries whose companies are being harmed by the restrictions placed on the market by the U.S. laws.

The PWC study had been commissioned by the UC Group, which runs an online payment service provider that does not currently conduct business with American customers, but would like to do so in the future if the legal landscape were to change.

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