The tax-code changes passed last week by both houses of the U.S. Congress would have sent American horseplayers flying off a fiscal cliff had it not contained an exemption allowing them to continue deducting gambling losses against winnings regardless of new caps on itemized deductions.
The National Thoroughbred Racing Association deserves credit for lobbying for that reprieve, but its work in this area is not done. The Internal Revenue Service’s policies toward taxing gambling proceeds remains blatantly unjust and in need of reform. The continuing failure of the racing industry to change the fundamental problems with the tax code is costing it hundreds of millions of dollars a year in lost business.
The tax laws for racetrack gambling proceeds have changed little since the bygone era in which they were created, when the $2 bettor was the backbone of the industry and the most exotic wager was a daily double. It may have seemed reasonable then to consider a wager that paid more than 300-1 a lottery-like windfall to which the authorities had to be alerted. Today, however, with grandfather’s win-place-show bets accounting for less than a third of the handle, most players are regularly pursuing those higher-risk/higher-reward wagers, and getting themselves into tax trouble the moment they succeed.