McDermott bill would use revenue from new online gaming tax for foster kids

Rep. Jim McDermott will introduce legislation Thursday to tax online gambling and send the proceeds to foster care.

McDermott’s bill, an updated version of legislation he introduced early last year, also would give 6 percent of online gaming taxes earned within their borders to state and tribal governments.

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McDermott (D-Wash.) said he made the changes because state government budgets have been hit hard by the recession and social services, like children’s health insurance, are suffering.

“The major reason is to make it possible for states to have access to online gambling revenue,” McDermott, a member of the Ways and Means Committee, told The Hill.

Taxes in McDermott’s bill could raise $30 billion over 10 years in new state tax revenue. About 25 percent of the revenue collected from federal taxes, estimated about $42 billion over 10 years, would go to foster care programs.

“I wanted to help out foster kids. I have watched them always get the short end of the stick,” McDermott said.

The new bill has the backing of online gambling companies that want their business to be legalized. They believe this could help create new jobs and bring in new government revenue when budget shortfalls have been rampant.

“This legislation is a win-win for federal and state leaders, providing an opportunity to regulate a currently offshore and underground industry, protect consumers and put to good use tens of billions in otherwise lost revenue,” said Michael Waxman, a spokesman for the Safe and Secure Internet Gambling Initiative, in a statement.

McDermott’s bill would serve as a companion piece to legislation being pushed by Rep. Barney Frank (D-Mass.) that would legalize the online gambling industry in the United States.

The Internet gaming industry was banned in the United States in 2006 when Republicans attached a provision to a port security bill to prohibit online gambling.

Conservative Christian groups lobbied hard for the measure, believing more gambling could hurt family life. They were joined by professional sports leagues, which also oppose legalizing online gambling.

Frank’s bill has 66 co-sponsors, including Republican Reps. Pete King (N.Y.), Frank LoBiondo (N.J.) and Ron Paul (Texas). The House Financial Services Committee chairman had a hearing on his bill in December this year but has not marked it up yet.

Steven Adamske, a spokesman for the committee, said the bill remains “a priority” but could not say when the legislation would be marked up and sent to the House floor.

“It is impossible to say that because of the crowded schedule. We just don’t know when,” Adamske said.

With the House moving on healthcare reform earlier this week, Congress’s schedule should begin to clear. But another big agenda item, new regulations for the financial sector, will consume Frank’s time later this year as the House and Senate work to send final legislation to President Barack Obama.

McDermott said he is talking to House Ways and Means Committee Chairman Sandy Levin (D-Mich.) about holding a hearing on his bill. Once Frank’s bill is marked up, McDermott will push for his bill to be considered and believes he will attract more co-sponsors.