Rep. Levin considers legalizing, taxing online gambling

Deb Price, Detroit News Washington Bureau -- Washington -- Rep. Sander Levin today turned the focus of his powerful House Ways and Means Committee to bills to legalize and tax online gambling.

"We need to get a sense of the size and scope of this emerging market," said chairman Levin, D-Royal Oak, who didn't reveal his hand on whether he supports dismantling U.S. laws banning online gambling.

Passions were strong on both sides of the debate: Supporters argued the ban doesn't work, infringes on individual and Internet freedom, and cuts off badly needed tax revenue.

But opponents argued the ease and privacy of gambling at a home computer would entice people who otherwise wouldn't gamble to go into debt, leading to more suicide and divorce.

In addition, Democrat Rep. Shelley Berkley, who hails from gambling-friendly Nevada, argued for legalization but no taxation, which she said would hamper the ability of a future U.S. online gaming industry to catch up to global competitors with a big head start.

It's unclear whether the legalize-and-tax proposals will get through Congress this year, despite a big push by advocates and pressure from the World Trade Organization.

Rep. Jim McDermott, D-Wash., one of authors of the two key House legalize-and-tax bills, explained he would use part of the resulting tax revenues to pay for programs for foster children, early childhood education and the arts.

The U.S. ban -- known as the Unlawful Internet Gambling Enforcement Act -- hasn't stopped Americans from gambling, he pointed out, but instead has driven it underground, leaving gamblers unprotected and the federal government and states without tax revenue.

"Despite current U.S. laws aimed at preventing Internet gambling, every day millions of Americans gamble on the Internet," McDermott said.

"Prohibition hasn't prevented the millions of Americans who want to gamble online from doing it. It has forced Internet gambling operators to work offshore, it has put consumers at risk, and it sends billions in dollars of revenue to other nations."

McDermott said legalizing gambling would generate $42 billion in tax revenue over 10 years and create more than 30,000 jobs in the first five years.

"There's $42 billion sitting here on the table," McDermott told the committee. "Which one of you is not interested in collecting $42 billion by legalizing and regulating something that is going on in society ... Don't turn your nose up at 32,000 jobs."

But Rep. Bob Goodlatte, R-Va., testified legalizing gambling would impose "harm on the most vulnerable members of our society just to raise money for more big government spending."

Goodlatte told the story of a constituent's college-age son who became addicted to online gambling, fell into deep debt and committed suicide.

"Gambling is not a victimless activity," he said. "In fact, the negative consequences of online gambling can be more detrimental to the families and communities of addictive gamblers than if a bricks-and-mortar casino was built right next door."

The two bills are:

- The Internet Gambling Regulation, Consumer Protection and Enforcement Act, which would set up a legal framework to license and regulate online gambling. It would require Internet gambling operators to ensure that gamblers are of legal age, as defined in the state in which they are placing a bet, and not accept bets in states that prohibit such betting.

The author, Rep. Barney Frank, D-Mass., called the current ban -- in which banks and other companies are prohibited from processing payments related to online gambling -- "an inappropriate interference on the personal freedom of Americans."

- The Internet Gambling Regulation and Tax Enforcement Act, which would tax gamblers' winnings, impose a one-quarter of 1 percent tax on wagers, and create a 2 percent tax on online gambling deposits paid by operators. The new deposits tax plus state taxes on winnings would generate $30 billion over 10 years for states and tribes, McDermott said.

Rep. Wally Herger, R-Calif., criticized taking time to hold the hearing, pointing out that only four years ago, the House overwhelmingly voted to ban Internet gambling.

"Why are we even holding this hearing when so many other more pressing issues confront us? ... There are far more pressing issues we should be focused on -- like actually creating jobs," Herger said.

Michigan supporters of legalizing online gambling include Rep. John Conyers, D-Detroit, who chairs the House Judiciary Committee.