Funding State Budget Deficits By Overturning The Online Gambling Ban

States are facing huge deficits and a few Washington politicians have an idea of how to pay for them. They want to reverse the online gambling ban and tax the transactions.

The way laws are passed in Washington would be funny if they weren't so maddening. Here's how it works. I write a bill that says anyone killing puppies for fun is guilty of a crime. Everyone can agree with this, so the bill is obviously going to pass. Just before the vote happens, a bunch of my political peers attach "riders" onto the back of the bill. A vote for my puppy bill is also a vote for those bills. This is how bad law gets made and it happens regardless of whether Republicans or Democrats are in office.

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This is exactly what happened with online gambling and, more specifically, online poker. The Bush Administration pushed a bill called the Safe Harbor Act. It was designed to provide money to secure our commercial harbors against terrorist acts. Who could be against that? Nobody. At the last minute, however, a rider was attached that made it illegal for financial institutions to process payments to online gambling sites. Overnight, online gambling was done.

Some people might suggest this was a good thing because gambling is addictive and immoral. Others might suggest people should be free to do what they wish and the government should stay out of our lives. Whatever your view, I respect it but am also ignoring it in this case. Why? This ride had nothing to do with such issues. It was an effort by one gambling niche to put another niche out of business so it could increase its profits. How do we know this? Well, the bill contained some exemption. Online horse racing, lotteries and fantasy sports betting are all exempted from the act. Gee, I wonder how that happened!

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A new twist on the ban is now surfacing. As you've probably noticed, the various government agencies are about as broke as it gets. This is particularly true for states where the red ink is flowing so badly that Illinois has simply stopped paying its bills all together. I kid you not! Well, a group of politicians including Barney Frank want to repeal the bill on online gambling and replace it with a tax. The states would receive a 6 percent tax paid on deposits by gamblers with another 2 percent being paid to the federal government which also happens to be broke.

I fall into the group that believes we should be free to do whatever we like within reason and the government should stay out of our business. Hey, this is a tax site after all! That being said, I am troubled by this proposal. Why? It effectively creates a federal sales tax by any other name. While I don't mind when it is applied to gambling, we both know it won't take much imagination for the government to start extending it to other areas. Soon, we'll have a national sales tax and that will not be a good thing.

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