By Jennie Rees
Kentucky Racing in the spotlight
Kentucky Representative Adam Koenig raises the banner for the most neglected part of horse racing: the gamblers.
Koenig of Northern Kentucky has been appointed along with Senator Damon Thayer of the Pari-Mutuel Wagering Taxation Task Force to review tax policies on gambling on Commonwealth horse racing products.
Koenig recently told the weekly Kentucky Racing Spotlight radio show that based on the task force’s findings, he will legislate for a flat 1.5 percent tax on the gross (before winning bettors are paid off) of pari-mutuel bets, including the highly successful historic horse races. Such a move would significantly increase the tax on betting on Kentucky Racing through online platforms known as Advance Deposit Wagering (ADW).
Another provision Koenig is defending in the bill he plans to introduce during the current 2022 legislative session: rounding the payouts to the cent, rather than the dime on a $1 mutual agreement.
The practice of rounding down is known as: fraction. It’s a decades-old policy that allows racetracks and any licensed bettor, ADWs included, to keep the extra money, much to the frustration of horse players who feel it should be returned to winning bettors.
“Perhaps what I am most excited about is the elimination of fractures in live racing,” Koenig told Kentucky Racing Spotlight presenters Joe Clabes and Jennie Rees. “It’s something that happens everywhere on every track. Win, place, show… they (pay) – at least in Kentucky and most other states – up to every 20 cents (on a mutual price of $2). You pay $3.20 or $3.40 or $3.80. But that’s not how it goes. You might make $3.47 or $3.68. We’re going to try to make that happen. Because it’s your money and it goes back to – I don’t know, the 30s or 40s – when the only place you could legally gamble was the track. There were long, deep lines, and they didn’t want to pay everyone to the cent every time they came up.”
If Koenig is successful, Kentucky would be the first state to essentially eliminate rift. New York, with a sliding fraction calculation, is the only state in the past 30 years to tackle rift, but the proposed plan for Kentucky is easily the most player-friendly of all, according to industry expert Pat Cummings of the Thoroughbred Idea Foundation.
“I think not only will it be great for the gamblers, but I believe it will be an incentive for people across the country to bet on Kentucky races,” said Koenig, an Erlanger resident whose district is in Boone and Kenton County is adjacent to Turfway Park. “Maybe if you’re a gambler like me who bets $5 to win, place on a race, it’s not that big of a deal. But if you’re someone who doesn’t mind betting $200 across the board on a horse, that adds up to real money over time. I think the tracks will get the money back with extra bets.”
“… I’m not doing it to cost the (tracks) money or even to help their product. I do it because by passing this HHR (legislation) and increasing the number of HHR machines, we have taken care of the breeders, the owners; the trainers and jockeys are running for bigger pockets,” Koenig continued, referring to legislation passed last February to protect historic horse racing. “The only person we haven’t taken care of is the gambler. You can’t run the show without all those people, but you have to have the gamblers.”
The task force was convened in the wake of last year’s approval of SB 120, which purged the language to ensure historic horse racing was legal under the Kentucky Constitution. Some lawmakers believed that HHR should be taxed at a higher rate, with more money going to the state’s General Fund. Subsequent testimonials documented that — by being taxed on gross rather than net income and with a mandatory amount going to live racing purses — the excise tax on HHR is, in fact, 32.2 percent.
That places Kentucky’s tax rate on the high side of surrounding states with casino games, testimonials for the task force documented. While standardizing the 1.5 percent excise tax, Koenig’s bill would increase the tax on online and telephone betting in the state from 0.5 percent to 1.5 percent.
“There is a range of tax rates when you place a bet,” says Koenig, who continues to work on the language of the bill before submitting it. “… If you are on a track and you go to the window, go to a (self-betting) machine, there is 1 1/2 percent tax on that. But if I’m in Keeneland or Churchill Downs and I bet on a simulcast race, Oaklawn say, there’s a 3 percent tax. If I bet on my phone on that same race in Oaklawn, it will be taxed at half 1 percent. I’m sure these tax rates made sense when they were created. But now they don’t make much sense.
“…I believe we’re going to make a decent amount of money, especially by increasing the ADW tax from half a percent to 1 1/2 percent. It’s very complicated, because within those tax rates, you’re financing thoroughbred purses, for standard breeds, and you’re financing the University of Louisville (horse trade) program. Financing pays for improvements on the track. It’s more complicated than I ever thought. We’re going to smooth it out so it makes more sense, and we’re going to generate some extra income for the Community Chest.”
Koenig said his bill also removes all restrictions on how supplements from the Kentucky Thoroughbred Development Fund (KTDF) can be used, as long as the recipient horses are Commonwealth bred and sired by a Kentucky stallion. The bill would leave it to the Kentucky Horse Racing Commission’s KTDF advisory board to set policy, but the Kentucky-bred supplements are expected to be added to claim races for the first time.
Among other likely provisions:
• Funding for the equine programs at the University of Kentucky and the Bluegrass Community & Technical College.
• Require the horse racing industry to pay the costs of its regulations, while the budget for the race committee is currently coming from the Community Fund.
• Create an income stream to help problem gamblers. HHR facilities would be needed to maintain and share self-exclusion lists where problem gamblers who request to be on the list are denied access to such properties.
• Kentucky’s 2022 Legislative Assembly runs through April 14.