The Irish government is fed up with losing tax revenue to offshore online casinos. Online gambling is legal and regulated in Ireland, but there are plenty of Irish citizens who visit and play at online casinos based in other countries. Ireland wants a cut of that money.

Last week, Irish Taoiseach Brian Cowen announced a plan to begin taxing online gambling companies that access the Irish market. If his bill is passed, online casinos, bookmakers and any other internet or telephone betting companies would have to obtain a license from Ireland in order to do business with Irish customers.

It sounds like a good idea. If a company is going to do business with people in your country, why shouldn’t they have to be taxed like domestic countries do? However, there is a problem with it. For one thing, there is no law preventing Irish citizens from gambling at online casinos based overseas that do not have the required license. Also, there is no way for the Irish government to prevent their citizens from playing at an offshore online casino that they find via the internet (such as by doing a Google search). They could only prevent that if they decided to act like China and take authoritarian control over the Internet, which is not something I can see the Irish doing.

Therefore, it really only comes down to advertising. Foreign online casinos can only advertise in Ireland if they obtain the license. Without one, they cannot put ads in magazines, on TV, on the radio, on benches and buses, on subways, or anything like that. They will, however, still be able to advertise freely online, since the internet is global and Ireland doesn’t censor it.

Yesterday New Hampshire lawmakers met for a deficit summit, the plan of which was to reach a decision on how to close a $295 million shortfall. One of the ideas proposed was a gambling expansion. Republican Senator John Gallus stated that gambling expansion “is a way to close the gap and not put it on the backs of property taxpayers.” He added that he doesn’t think they can “tax our way out  of this mess” and stated that the proposed expansion would not only add revenue without increasing taxes, but it would also create jobs.

Gallus wants an expansion of slot machines and casino-style gambling and a tax on the slots of up to 39%. This tax, unlike property tax, would be voluntary, since only those who play the slots or offer slots would be affected.

Some members of the House are unconvinced, though, and are concerned that they do not yet have an efficient regulatory structure in place. There is also a fear of corruption. House Deputy Speaker Linda Foster, a Democrat, said that New Hampshire needs to set up a more comprehensive enforcement system than the currently existing one before expanding gambling in the state. “This is a leap into a much more serious kind of gambling,” she said. “I don’t feel it is something that can be turned on a dime.”

The deadline for the House and Senate to come up with a compromise plan to deal with the budget deficit is tomorrow. It seems unlikely that they will reach an agreement on gambling expansion by then. Other ideas, such as property tax increases and raising rates on power companies, are also on the table.

Many states that had previously been opposed to gambling are trying to legalize it now. As a recent Wall Street Journal article explained, such an occurrence isn’t uncommon. Tough times cause people to rethink their priorities. After all, if unemployment is through the roof and people are losing their homes and jobs, how important is a ban on certain “vices?” That’s a question each person has to answer. Some people say you should never compromise your morals, while others say that desperate times call for desperate measures. Maybe the truth is somewhere in between. Maybe during tough times people consider whether those things they thought were vices are really that bad.

Prohibition was repealed during the Great Depression, as was the ban on horse race betting. It was during tough economic times in New Jersey that Atlantic City voted to legalize casinos in 1976. In 2001, after the 9/11 attacks, New York expanded video gambling in their bars in an attempt to increase revenue.

Many counties across the United States have eased or are considering easing their restrictions on alcohol sales on Sunday. Twelve states have expanded or are considering expanding gambling as a source of additional revenue, including Florida, California, Colorado, Minnesota, Ohio, Iowa, Missouri, Kentucky, Maine, Massachusetts and New Jersey.

The state of Ohio marks the most drastic reversal on opinion regarding gambling. During the 1990’s and 2000’s, Ohio voters rejected plans to build casinos four times. The message was clear: The people of Ohio don’t want casinos in their state.

So what do they say now? Facing 11% unemployment and a state budget deficit of $3.2 billion, Ohio voters approved a plan to build new casinos in the state. The state’s current governor, Ted Strickland, has also reversed course on the gambling issue. In the past, he opposed gambling and called it a regressive tax on the poor, but in an attempt to ease the budget woes, he proposed an expansion of video gambling machines. Strickland was against building full-scale casinos, but signed the bill as a concession to the voters.

To his credit, Ted Strickland put aside the fact that he’s a Democrat and has made a lot of cuts in his state’s budget, including reducing spending by $2 billion, cutting 2500 government jobs, and slashing the budgets of most state agencies by 10-20%. However, he found that without adding additional sources of revenue, such as gambling, he would have to slash the agency budgets by at least 30%, which is something he wants to avoid.

It probably won’t surprise you to know what is accounting for most of Ohio’s budget problems: Medicaid and other entitlement programs. Though entitlement programs are a much bigger problem at the federal level, they are crippling states as well (especially California, but that’s another story). Margaret Thatcher once said that “the problem with socialism is you eventually run out of other people’s money.” Such is the problem with social entitlement programs. They are basically a Ponzi scheme that robs Peter to pay Paul. The problem is that they pay out more money to Paul than Peter pays in. If you are giving out more money than you have coming in, that puts you in debt. Such is the case with Ohio, most other states (38 are in the red) and the federal government.

Therefore, an expansion of gambling is a good idea as part of the fix, but it can’t fix the economy alone. There are many other changes that need to be made, with the main changes being to reduce spending and reform (or end) the entitlement programs. Unfortunately, I doubt Governor Strickland sees that.

A recent study on US gambling habits claims to show that while visits to brick and mortar casinos are declining, there is an increase in online casino business. This is despite the belief that online gambling is illegal in America (wrong: it is only banned in 4 states) and the worry that the passage of the UIGEA in 2006 means the government can prosecute online gamblers and confiscate their winnings (it gives the authority for neither).

A survey by a media study group called Mintel International Group showed that 30% of Americans visited a land-based casino in 2009, which is down from 35% in 2001. Mintel also reports that 12% of Americans visited an online casino in 2009, which they say is an increase from an undisclosed amount. In truth, there is no way to accurately determine how many Americans gamble online, since so many think it is illegal or at least vague (to say that some states’ gambling laws are unclear on the subject is an understatement).

So what does this all mean? Perhaps nothing. You may recall that in 2009 the economy started getting pretty bad, with the bank bailouts and the housing bubble bursting and everything. Job losses, fear of job losses, depleted savings accounts and 401(k)’s led to a decrease in tourism everywhere, and that includes hotspots like Las Vegas.

Many in the online gambling community, including some of our competitors, have looked at this information and concluded that it means online casinos are taking business away from brick and mortar casinos. It means people have decided to gambling online instead of taking a trip to a casino. That’s possible, but it’s impossible to tell conclusively. Maybe if we were certain that the online gambling figure of 12% was a significant increase, that would mean something. However, with no previous number given, maybe the 12% figure is a decrease as well. Also, one year isn’t a big enough sample to conclude that former land-based gamblers are now playing online. In one year, any shift could be because of the economy. Even if more people are gambling online, it could be because it’s cheaper and if/when the economy improves they will go back to taking trips to Vegas and Atlantic City.

But for the sake of argument, let’s say that it’s true that people who once gambled in land-based casinos are now exclusively playing online. Why would that be? It’s probably because of price and convenience. Blockbuster is fighting tooth and nail to keep every possible customer right now amid their massive store closings, while people flock to Netflix and Pay-Per-View. Those services are cheaper and don’t require the customer to leave their house. Remember, Americans are lazy. Similarly, iTunes and internet piracy has led to closings of countless music stores. I even went into Best Buy recently with a list of about 20 CD’s I was looking for and couldn’t find one. They had nothing but bare shelves with one copy of a few current hit albums. It’s a sad day when a music store doesn’t fully stock CD’s anymore. They did, however, have lots of iTunes gift cards.

Whether the trend toward online gambling, if it’s a trend, continues or not, this study does tell us something: At least 12% of the country is gambling online at casinos that are operating in the jurisdiction of other countries. That is a lot of tax revenue that the government is losing. If there’s one thing our power-hungry government hates, it’s missing out on the ability to take someone’s money. Therefore, you can probably expect a federal regulation of online gambling in the near future.