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State Tax Revenue from Online Casinos

Nevada and the American Gaming Association continue to hesitate when it comes to supporting the reversal of the controversial Unlawful Internet Gambling Enforcement Act (UIGEA). Congressman Barney Frank has proposed an alternative piece of legislation that would not only neutralize the UIGEA, but would allow the federal government to license and regulate the U.S. online casino gambling industry rather than continue the current ban on foreign gambling companies. Jim McDermott has proposed an accompanying piece of legislation that would then give the individual state governments the right to tax online casinos offering services to state residents – that tax revenue could then be used to fund social programs and support individual state governments.

Despite the logic of the act and the more than $40 billion in revenues that would go into state coffers over the course of a decade of implementation, the state of Nevada is still against legalizing online casinos in the U.S at this point. The AGA takes a less firm stance in the situation, instead stands by earlier support of a year-long study of the internet gambling industry, a bill proposed by Shelley Berkley. Nevada is has the most well developed land gambling industry in the states thanks to the Las Vegas strip and there is an element of protectionism in Nevada’s actions. Nevada is certainly looking for ways to protect the land gambling industry from the threat of online casinos.

McDermott uses the argument that is quite common among the supporters of the online casino gambling industry – there is no real way to truly ban the pastime so regulation is the only alternative. He comments, “The gamblers want it; the poker players want it because they want a system in the United States, run in the United States, governed by our laws rather than floating out there in the world of the Internet.” An unregulated online casino gambling industry poses some real issues and potential harm to U.S. players and Frank and McDermott’s bills would protect U.S. players while provided needed revenues for the state governments from taxing the industry.