Legislative largesse for U.S. sports

Benefits: A bill intended to address an illegal trade subsidy sprouts favors for horse racing, NASCAR and makers of bows and tackle boxes.

Corporate Tax Breaks

October 15, 2004|By Jeff Barker | Jeff Barker,SUN STAFF

WASHINGTON - While public-interest groups were deriding billions of dollars in business tax breaks approved by the Senate this week, Maryland horse racing executives celebrated a provision that could significantly boost foreign betting at U.S. tracks.

It goes to show that one person's "pork" is another person's "perk."

The provision - one of at least a half-dozen in the bill affecting sports - eliminates a 30 percent withholding tax that foreigners must pay on winning wagers into U.S. horse-track betting pools.

The provision could mean at least $135 million a year in the pockets of American tracks and horsemen, according to industry estimates.

The language was contained in a broad bill widely criticized not only by public-interest groups, but also by some lawmakers, as containing "pork" and corporate "giveaways." Racing officials from Maryland and other states denied that eliminating the bettors' tax amounted to "pork."

The tax has been a huge disincentive for foreign bettors to wager on big American races - such as the Preakness - and commingle their bets with those of U.S. residents. Canadian tracks have their own distinct betting pools for races at American tracks to evade the tax.

Ending the tax would be "a significant step" in opening the $85 billion international horse racing market, said the National Thoroughbred Racing Association, the industry's trade group.

If even 5 percent of that market entered U.S. pools, it would mean $4.25 billion in wagers and about $135 million in commissions for domestic racing interests, NTRA said.

The racing provision was inserted into the bill by, among others, members of the Kentucky congressional delegation, according to industry officials.

In Maryland, home of the Preakness, the change is considered "very positive," said Jim Gagliano, executive vice president of Maryland racing operations.

"A chance to commingle these pools with international wagers is terrific. Racing is very popular in the United States but also in other countries, so having wagers directly into our pools for big events could be significant."

In Europe, American racing is televised during the evening prime time.

Racing industry executives have been lobbying to kill the tax for the past several years.

The racing association was formed in 1998 largely to expand the industry's influence on Capitol Hill. Its members include tracks, horsemen and breeders. In the past several years, the association has formed its own political action committee and increased its lobbying efforts.

The association denies that eliminating the betting tax will cost the federal government money.

"It's very easy to look at these things and say it's not good public policy. That's a fundamental misunderstanding here," said racing association spokesman Chip Tuttle.

Keith Ashdown of Taxpayers for Common Sense, an advocacy group, said that horse tracks are hoping foreign bettors will turn into a "cash cow." Ashdown's group estimates that eliminating the withholding tax will cost the U.S. government $27 million.

But Tuttle disputed that, saying foreign track operators are currently so resistant to the tax that their bettors aren't wagering into American systems - meaning there is little or no government revenue to be lost.

Under the new system, foreign bettors would still be taxed on some winnings - as Americans are - but they wouldn't be subject to a 30 percent levy upfront.

The legislation, already passed by the House, was approved by the Senate, 69-17, on Monday and is expected to be signed into law by President Bush.

The legislation's stated purpose was to end a trade fight over illegal U.S. subsidies to export industries.

But Sen. John McCain, an Arizona Republican, said in a floor statement that the legislation had become overstuffed with "corporate pork and special interest tax provisions."

McCain and Taxpayers for Common Sense both included the horse racing provision on their lists of questionable items in the bill.

In their criticism, they also cited other sports-related provisions under which:

NASCAR track owners could write off the cost of their grandstands and other facilities on their taxes over seven years. The IRS has been pushing for a depreciation period of about twice that long, reducing the track owners' yearly deductions and making the owners wait longer to recoup their investments. The bill language was pushed by, among others, Republicans Sen. Rick Santorum of Pennsylvania and Rep. J.D. Hayworth and Sen. Jon Kyl, both of Arizona.

Taxes would be reduced to help U.S. makers of bow hunting equipment compete with foreign competitors. The measure was championed in the House by Rep. Paul Ryan, a Wisconsin Republican who is a bow hunter.

Taxes would be lowered on fishing tackle boxes. Dennis Hastert, the House speaker, has a major tackle box manufacturer in his Illinois district.

New professional sports team owners could write off the full value of their teams instead of only deducting money spent on player contracts.

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