Friday, March 07, 2008

Tax and destroy

I don't understand why so many people seem to think it's a good idea for the government to view online poke as a potential cash cow for government tax collections.
Some in Congress are beginning to recognize the potential financial windfall of legalized online gaming.

Back when the mob ran the numbers game the payouts averaged 60% of the take, now that the state runs it a Pick 3 pays $500, 50% of the average take.

It's even worse for the big prizes. State lotteries target the million dollar payouts at 50% of projected sales, but that's the nominal payout, the actual payout is discounted from that based on a 20 year payout.

You got a better deal when crooks ran it.

Excessive taxation is destroying horseracing. Even New York City is in danger of losing it's off track parlors to high state taxes.

Find another arguement for justification of keeping poker legal. Don't use "if you legalize it you can destroy it and make money while you're destroying it" as your arguement. It's really self-destructive.

6 Comments:

Blogger Deryl said...

Thank you. This is exactly what I want some one with some real clout to say.

Encouraging rent-seeking from the government is never a good idea.

If the government never passes another law in regards to poker, I'd be perfectly content.

9:07 AM  
Blogger HighOnPoker said...

Yeah, great call Gary. I do believe that if the govt was smart, it would seek to tax rather than ban online poker as a means of regulating it. HOWEVER (and that is a big however), I also recognize that govt oversight would not only increase rake/etc. to cover taxes from the sites to the US govt. It would also require a lot of players to declare poker profit on their taxes, which would decimate the slightly profitable players.

Govt is the rake.

3:13 PM  
Blogger DMW said...

HighonP, you do have to declare poker profit on your taxes.

Gary, you should know what Mafia goons did to those who won in their games. The common man does NOT get a good deal from crime bosses.

1:01 PM  
Blogger Deryl said...

highonpoker-
I won't claim that there won't be an increase in rake if the gov't starts to tax these sites somehow, but I doubt it. If it was economically feasible to raise the rake, the companies would already be doing it.

7:35 PM  
Blogger Gary Carson said...

Deryl,

Just because it's not profitable to raise the rakes does not mean it's not economically feasible.

If government starts taxing there will will be rake increases, even though it might cause profit decreases. What government will give the industry in return is barriers to entry from potential future competition.

In my lifetime racetrack holds has gone from about 14% to about 25% because of tax increases. That has not been good for gamblers or for the racetracks, but it's what happened.

dmw
When I lived in Baton Rouge my wife was a frequent player of mob backed football parley cards. She did pretty well on them, was a frequent winner of small jackpot payoffs. She never had a problem collecting.

I didn't say the mob offered a good deal on their bets, I said they offered a better deal then the state gives.

8:40 PM  
Blogger Deryl said...

Gary-

I probably should have written "prudent" instead of "feasible".

My point is that the only reason that they would raise the rake is if they thought they could make more money from it, regardless of the tax level. If raising the rake will increase revenue, they will do it with or without the taxes. I don't see how adding a tax wil make it more profitable to raise the rake.

If the taxes cut into profits enough, it could make some sites unprofitable. Then those sites would be driven out of business. If that happens to enough sites, I could see the rake going up then.

Also, I want to make it clear that I'm not in favor of the taxes. I'm just disagreeing on the effect it will have on the rake.

1:24 PM  

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