Tax bill may hit industry hard in the wallet

HORSE RACING Notebook

August 16, 1992|By Ross Peddicord | Ross Peddicord,Staff Writer

Call it Midsummer Madness.

But recent events in two diverse segments of the horse world make one wonder if little dark clouds aren't appearing everywhere and affecting American horse sports.

At first blush, it looks as if the American Horse Council and the American Racing Federation have been asleep on the job. These are the two organizations that lobby on behalf of horsemen and, indirectly, horseplayers, on Capitol Hill.

Within the past month, Congress, at least the House of Representatives and the Senate Finance Committee, approved legislation that will increase the withholding tax on exotic bets from 20 to 28 percent.

The measure is expected to raise about $107 million for the federal government but could cost the racing industry from 1 to 2 percent of its annual betting turnover, or about $267 million, according to American Horse Council estimates.

Jay Hickey, director of government relations for the horse council, said he was stunned by the action.

"It's hard for people to understand. They think we should know about it or have been asleep at the switch," said Hickey. "But it's not business as usual these days. Normally, when a bill is introduced, hearings are scheduled and legislators learn the pros and cons of an issue from all the parties involved. Not anymore. Because of the deficit and budget crisis, legislators are now picking things out of the air. They are looking to raise revenues any way they can."

Hickey said that the original bill discussed before the House Ways and Means Committee stipulated raising excise taxes on gambling winnings, but excluded pari-mutuel bets. But when the bill came out of committee, about 90 minutes before it was voted on by the House, Hickey said, raising the withholding tax on pari-mutuel bets had been stuck in.

"We didn't have time to make the contacts we needed [to try to defeat the bill which passed by a voice vote]," Hickey explained. "I think few people had any idea what they were voting on."

The man who added the provision apparently was Maryland Rep. Steny Hoyer, D-5th, who chairs the Ways and Means Committee. At the time, Hickey said, Hoyer probably didn't comprehend the effect it would have on racing.

Similarly, when the Senate Finance Committee added the same provision as a revenue enhancer, blame was laid on the committee staff who prepared the legislation and not the lawmakers.

The Horse Council has sought help from Sen. Wendell H. Ford, D-Ky., to introduce an amendment to the Senate bill when the session reconvenes Sept. 9. The Ford amendment would keep the withholding rate at 28 percent but raise the winning threshold from $1,000 to $5,000.

Currently, the 20 percent withholding tax applies to payoffs of $1,000 or more at odds of 300-to-1 or higher. It mostly affects the high rollers or betting syndicates that win trifecta, Double Triple or Pick 6 payoffs.

If the Ford amendment is adopted, the withholding rate would be 28 percent on payoffs of $5,000 or more at odds of 300-to-1 or higher.

The industry is concerned because the taxed money, which could amount to $267 million, is taken out of circulation by the government and is not re-bet.

Many horsemen blame Congress for the woes currently affecting the horse industry. The Tax Reform Act of 1986 changed the tax code and eliminated certain tax advantages for owning racehorses.

Disaster in Barcelona

The U.S. Equestrian Team has come under fire for the way it picked the teams that represented America at the Olympics.

The United States, which has millions of horses and a multi-billion dollar pleasure horse industry, is usually a dominant force in international competition.

But this year, it could muster only two medals -- a bronze in individual show jumping and a bronze in team dressage.

For the first time, the USET picked the teams by objective criteria. A point system was established and points could only be earned by a single horse-rider combination at a few selection trials.

Previously, the teams were picked by subjective criteria -- a committee of prominent judges and horsemen observed the riders over a long period and picked the most experienced ones with a proven performance record. Then highly esteemed coaches such as Bert de Nemethy in show jumping or Jack LeGoff in three-day molded the team into gold medal competitors.

But all that changed after Debbie Dolan, a show jumping rider, was picked for the U.S. team at the 1990 World Championships. Dolan was replaced before the competition and subsequently filed suit against the USET.

Although Dolan's suit recently was dismissed, the USET abandoned the subjective criteria and replaced it with the point system.

The result was a fiasco in Barcelona. Many top show jumping horses such as Gem Twist, Starman, Mill Pearl and Salut had mishaps in selection trials that turned out to be minor misfortune.

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