The bills by Barney Frank and Jim McDermott include measures to tax online gambling sites two percent of gross revenue and to assure all winnings are taxed as income.

While much of the online casino industry considered this week a huge step forward, with the release of US legislation to license and regulate Internet gambling, there are some rumblings about the potential tax structure. The bills by Barney Frank and Jim McDermott include measures to tax online gambling sites two percent of gross revenue and to assure all winnings are taxed as income.

Industry officials say a similar giddy mood erupted when the United Kingdom agreed to regulate and license online gaming, only to find that Prime Minister Brown, then Chancellor of the Exchequer, established such a high tax rate that many operators refused to apply for licensing.

OCA gaming analyst Sherman Bradley says Internet casino owners had hoped taxation would be placed on profits, rather than total intake. Meanwhile, frequent online players wonder how the recording of their results will affect their personal taxes.

"A major reason people play online slots is because the payout is so advantageous to land casinos," says a long-time online gambling insider who insisted on anonymity. "Now, government gets involved, and jacks the cost of running Internet casinos up, to where the return on machines has to be lowered."

Bradley notes that at least online patrons won't have the misfortune of having to prove their losses, as they do with land casino gaming. Because all transactions will be preserved, there will be an accurate record of both losses and wins. At land casinos, big paydays are taxed, and then it's up to the player to prove losses.

"Bureaucrats will drain the excitement from the games, taking so much money for tax that players will leave the sites," says online regular patron Tommy P. "After all, what's the worst return in all of gambling? The state-run games, like lotteries. Government gambling is the one type of gaming that truly fits the picture of evil, oppressive gaming beating down the average guy."

Published on May 9, 2009 by TomWeston

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