Time to Legalize and Tax Internet Gambling in U.S.
There are plenty of reasons to dislike Financial Services Committee Chairman Barney Frank. But there is at least one reason to throw him a scrap of praise: He took a principled stand opposing attempts to ban internet gambling and he’s apparently sticking with it. Sure, he doesn’t apply the same principles consistently and throughout his policy decisions, but when it comes to gambling on the internet he’s the only lawmaker calling it like it is.
Since its passage, an ever increasing number of academics, politicians, and industry members have come out against UIGEA. The arguments of those opposing UIGEA have varied, but a popular and effective argument in light of the economic crisis is the potential for tax revenue that congress might draw from the lucrative online gaming industry.
Barney Frank who will reintroduce a measure to repeal UIGEA, legalize and tax internet gaming as any other legitimate business, again had principled words for his fellow lawmakers using tax revenue as an excuse.
“Has it become the role of this Congress to prohibit any activity that an adult wants to engage in voluntarily if it doesn’t add to the GDP or make us more competitive?” Frank stated. Later he asserted that UIGEA was unlikely to prevent online gambling, certainly not of those who abuse it. “Prohibition didn’t work for alcohol; it doesn’t work for gambling.”
Frank, and others asserting the ineffectiveness of UIGEA seem to have be right. Focus on the Family, the conservative organization that had been a staunch supporter of UIGEA was forced to admit that it isn’t tempering gambling at all and that, in fact, gambling on the internet has increased since its passage.
The principle is simple, if an activity is legal in some cases and people want to do it, the government can try to stop them but all it will do is create a black market where there aren’t any consumer protections. Like the prohibition of alcohol before it, consumer bans just don’t work.
Like Frankie said, if American adults want to gamble in the privacy of their home, with their own funds, nobody (especially not Congress which is gambling with trillions in tax payer money at the moment) should have the right to stop them.
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Legalized gambling is already heavily regulated and taxed in casinos around the world. Regulatory agencies weed out the "toxic" games and wagers, allowing only those with reasonable risk to be offered. Sure the house always wins in the long run, but not always in the short term. The money earned by the casino must cover the costs of doing business, which is why not all casinos are profitable. The customer must feel that they receive a fair serving of entertainment for the money spent (lost) playing a game or machine, or they wouldn't do it.
Every human activity is subject to abuse. Eating, dieting, driving, praying, procreating and responding to online articles can all create social and personal damage. But there is no general view that this damage can, or should, be prevented by banning the root cause. Surely eating disorders cause personal damage on a scale with compulsive gambling, and are harder to cure.
Buying and selling stocks or other risk assumption instruments is simply gambling. One can know the odds of loss, but the price of the risk is set by the buyer, not the seller. Same thing in the casino or online gambling. Actually most online gambling operators charge less for the entertainment experience they provide because the cost of doing business is less than brick and mortar casinos.
Finally, there is the money thing. America needs money. Not only do we lose the business taxes to the foreign governments (or Indian nations) that host the gaming, but if net winnings were reported annually via 1099G forms, a lot more gambling income would be reported. This happens now in casinos when jackpots, or tournaments are won, but not if you win a few grand playing cards or rolling the dice.
Our current economic pickle wasn't created by the corrosive effects of gambling. It was created by people who pursued their natural inclination to gamble by turning to the financial markets to scratch the itch. Let's let them scratch in the privacy of their own homes.
Banning tobacco and heavily taxing tobacco might be driven by a common shared ethical view of tobacco usage as being bad. Usage is banned when it is judged to harm another person physically. It is heavily taxed when it is judged to impair health and burden the health system.
Bars can be sued if they recklessly serve drunken patrons additional alcohol that leads to the death of an innocent.
If it was legally possible to penalize and punish and ban gambling activity that harmed innocent parties while heavily taxing all gaming I might entertain the legalization.
But it is hard to identify the gaming activity that is harming third parties. The values behind gaming are culturally corrosive. Gaming systemically preys on financially vulnerable households. It ought be illegal unless proponents can identify how to identify and ban activity harming innocent parties.