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TAXATION COULD BE THE QUID PRO QUO FOR A REPEAL (Update)
$20 billion over 5 years is one estimate
Taxation is likely to be the sweetener to get US fellow politicians
to support Congressman Barney Frank's attempted repeal of the controversial
Unlawful Internet Gambling Enforcement Act this week, according
to political observers in the respected Washington publication The
Hill.
Congressman Frank is set to give more detail on his repeal proposals
at a press conference Thursday, having already said that it is likely
to be a difficult task.
There could be a substantial financial incentive in terms of taxation
for a repeal move, and as chairman of the Financial Services Committee
Congressman Frank, a Democrat, is in a strong position to emphasise
the point.
Observers opine that Frank is looking to raise billions of dollars
with his new bill, which could be used to pay for expensive tax,
healthcare, or other domestic legislation that Democrats are keen
to move forward this year in an economy troubled by an expensive
war.
The Hill comments that the introduction of the bill and its expected
movement in the 110th Congress shows how much has changed in the
nation’s capital since the November elections. With Democrats
in the majority, the power of social conservatives diminished and
new pay-as-you-go rules, supporters of a repeal believe the time
to strike is now.
Frank, a longtime critic of regulating Internet gambling, opposes
the law on philosophical grounds. He told The Hill: “It’s
a terrible idea and there are a large number of people who think
it is a terrible idea. I don’t know how it ends. The worst
that happens is that enough anti-gambling busybodies will be less
inclined to interfere in people’s lives.”
Frank believes that the Republican Party is hypocritical in saying
it wants to reduce government intrusion but then passing legislation
that regulates certain personal freedoms.
In 2000, Frank said, “It is important that people be able
to do what the Republican Party wants them to do on the Internet.
If the Republican Party has no objection, then they can do it. But
if the Republican Party thinks there are pictures they should not
look at, or perhaps booze they should not buy, or bets they should
not make, then freedom for the Internet goes away.”
Gambling lobbying groups were more than pleased by Frank’s
announcement of his repeal initiative.
“We’re incredibly excited. I’m very interested
in what the final version will look like,” Michael Bolcerek,
president of the 350 000 strong Poker Players Alliance, said. “But
from what we understand, it will do the right thing for poker players
and at the same time protect the public interest.”
Bolcerek's group, led by former Sen. Al D’Amato, was formed
to overturn the gaming law or obtain an exemption from it for online
poker.
Because the [UIGEA] law significantly affects the financial services
industry in trying to disrupt US financial transactions with online
gambling companies, Wall Street is closely monitoring the Frank
bill.
Friedman Billings Ramsey, an investment firm, wrote in a strategy
memo that the Frank bill could raise more than $20 billion over
five years. The bill is expected to call for the Internet gambling
industry to be taxed through a structured system.
The Hill reports that Frank’s proposal could face an uphill
battle in the House of Representatives, which passed the stand-alone
measure 317-93 last summer. A less stringent version of the bill,
attacking online gambling financial transactions, was later attached
to an unrelated but must-pass port security measure in a late nigh
pre-recess session of Congress. This was signed into law by President
Bush.
One of The Hill's sources said that leadership officials in the
House are on board with Frank’s plan, though Frank said he
did not seek clearance from them.
Several members of leadership voted for the House bill last July,
including Speaker Nancy Pelosi (D-Calif.) and Majority Whip James
Clyburn (D-S.C.). Meanwhile, Majority Leader Steny Hoyer (D-Md.)
voted no, as did Ways and Means Chairman Charles Rangel (D-N.Y.).
Republicans, who spent over six years attempting to pass the Internet
bill, are mobilising against Frank’s effort.
“We’re going to fight it,” said Rep. Bob Goodlatte
(R-Va.), a leading proponent of the crackdown on Internet gambling.
“I’d be surprised if the new leadership would want to
bring back an issue that took six years, because of one Jack Abramoff,
to resolve.”
In 2000, then GOP lobbyist Abramoff, now a convicted felon, marshaled
his conservative allies in the House to defeat a bill that included
a ban on Internet gambling.
The proposed repeal could benefit the offshore gambling sites that
saw their U.S. customer base disappear when Congress stepped in
last year. Hedge funds helped to drive down their stocks in anticipation
of the curtailment of online gambling.
The share prices of PartyGaming LLC and 888 Holdings, two online
gaming companies that are traded on the London stock exchange, have
fallen more than 50 percent since last year. The stocks have started
to claw their way back in recent months, as hedge funds and other
investors came to believe the government would falter at stamping
out such a popular online activity. PartyGaming has seen its stock
roughly double in the past three months.
Some U.S. companies also stand to gain from overturning the 2006
law, including Cryptologic, which provides software and services
for internet gambling sites, said Andrew Parmentier, a senior analyst
at Friedman Billings Ramsey.
Lobbyists for banks and credit card companies that would have shouldered
much of the burden of enforcing the gaming crackdown, reacted favorably
to Frank’s announcement. “We’d be very pleased
to see that law repealed simply because it would remove a potential
burden on the financial system and especially on community bankers,”
said Steve Verdier, the senior vice president for congressional
affairs at the Independent Community Bankers of America.
“We also understand it will be a little bit of a road to
get a repeal,” he added.
Some in Congress believe that online gambling should be legalised
and regulated on libertarian principles; others resent the way the
law was rushed through after midnight without any debate on its
merits. It remains to be seen if they have the votes necessary to
repeal the UIGEA.
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