January 2012

Yesterday the New Jersey Assembly voted to approve a bill that would allow for residents of New Jersey to participate in some forms of online gambling offered through casinos licensed in Atlantic City. It will become law pending Governor Christie’s approval within the next few months.

With the failure of Harry Reid’s attempt in late 2010 to pass national legislation easing burdens on the internet gambling industry, advocates have been increasingly hopeful that states will begin to pick up the slack. Aside from New Jersey, online gambling bills have been considered in Florida, Iowa, and California.

The New Jersey bill (hopefully) has larger national implications. The bill might serve as a model demonstrating that allowing Americans to gamble within the confines of their own homes won’t end the world, that there will be safeguards in effect to alleviate concerns about limiting participation to adults, etc.

The legal implications aren’t completely clear to me but it will also somehow bump up against the Department of Justice’s continued seizure of funds related to online gaming — presumably they at least won’t be able to seize funds in New Jersey. In late 2010 over $8 million was frozen — hurting both companies offering online gaming and their consumers. When consumers request that funds be transferred to the sites or from the sites they must go through an intermediary. These intermediaries are under attack from the DoJ, and when their funds are frozen, online gaming providers must scramble to find other ways to withdraw money from player’s bank accounts or to get checks written to players in the case of withdrawing money from their online accounts (not to mention the fact that the U.S. government is effectively stealing $8 million dollars of profit, as the casino’s still provide payouts to players, even when initial payouts are seized). The frequency and scope of these seizures have been increasing, potentially ending the online poker industry in the United States without state or national legislation.

There are many bars in Washington, D.C., where one can find a free poker tournament. Such events draw in a diverse crowd of customers and allow patrons to have fun with activities other than drinking. But some outdated laws still on the books in Wyoming prevents bars from hosting these free and friendly games. This year though, state lawmakers intend to change things in the Equality State.

In 2004, a state attorney general issued an opinion that made serving food or drinks to anyone playing poker in a bar a felony charge for the establishment’s owners. In 2007, the decision was essentially reversed with a bill that legalized patron-organized gambling in bars.

Republican state Senator Bruce Burns wants to further clarify the law, making it legal for bar owners to organize the free friendly poker tournaments in their establishments. He also wants to change the rule that requires players to have a “bona fide relationship” prior to the game — meaning they would have to be standing friends, co-workers, etc. in order to legally play a game of poker.

Of course, bars will make some extra money from bringing in new customers of keeping current patrons in the bar longer, but I don’t see why that is a problem for some lawmakers in the first place. The whole point of a business establishment is to make a profit, and if customers willingly sit down at the bar or the poker table, who is to say that it is not a legitimate way to make that profit?  Besides, it seems like a better idea to have bar patrons engaging in games rather than simply pounding back shots of liquor or getting into a fight with their barstool-neighbor. Gambling and, in particular poker, has been shown to have a number of positive benefits for players, including improved strategic thinking, math ability, and simply improving social skills. Some studies even show that playing poker wards of Alzheimer’s disease.

On a personal note, I have played in a few D.C. bar poker tournaments and was most struck by the diversity of the group I was playing with. Many people around the table were yuppies just off from work, but there were also college students, bar employees, and residents of the Northeast D.C. neighborhood where the bar was located (for out-of-towners, this is not the wealthiest part of the city). There are far worse things a lot of these people could be doing rather than playing a friendly, but competitive poker game.

It’s about time everyone, not just Wyoming lawmakers, get over the old idea that gambling is a negative behavior, that it is evil, or that it is anyone’s right to tell others that they can’t play.

Though it is touted as a “dime a drink” increase on alcoholic beverages, the proposal in Maryland to raise the excise tax on alcohol will hit everyone in the state.

As I wrote last year, when lawmakers proposed the dime a drink tax, the excise hike will be paid upfront by the state’s alcohol distributors. Despite the cute name, the dime a drink tax increase represents an actual increase of about 700 to 1300 percent based on industry calculations. The presumption made by lawmakers is that the wholesalers will defray the cost by raising the prices they charge to retail stores and restaurants, and the restaurants/stores will raise the prices per drink on consumers. However, their assumptions and their calculations are wrong.

First of all, restaurants are not likely to just raise their prices on drinks to cover the increased cost of purchasing alcohol. Rather, they will raise prices on all of their menu items, which means that even non-drinkers will end up paying for the tax increase.

Second, lawmakers assume that Marylanders will continue to purchase alcohol at the current rate, but with the D.C. border not very far for almost all Maryland residents, it is more likely that even a slight increase in prices will drive liquor purchasers into the District where the excise tax and prices are already lower than surrounding states. Less patronage at Maryland establishments means a reduction in tax revenue.

In reality, this tax hurts the people who can afford it least — those restaurants still hurting from the economic recession and workers in the food service industry. Restaurants, which have been taking smaller and smaller profit margins as costs rise and patronage dries up, could be forced to fire workers or reduce salaries rather than raise their prices. Those waiters and bartenders that keep their jobs will likely see their tips dwindle as most people calculate tip by “rounding up” the cost of their meal or tab.

All in all, the so called “drink tax” will not raise revenue for the state, will hamper the state’s economy, and will hit those who are most vulnerable the hardest.