Taxes and Revenue

[highnote]

Here's an interesting article about how some states are actually lowering taxes on cigarettes in order to raise revenue.

http://news.yahoo.com/s/ap/us_broken_budgets_lower_tobacco_taxes

When states raise the tax, revenue goes up even though sales decline, Chaloupka said. Over time, tobacco tax revenues gradually drop after a tax hike as smoking use declines, he said. To drive revenues back up, states have raised taxes again.

The preceding quote from the article hits the nail on the head in predicting what will happen in California. California may see an increase in revenue in the short-term due to an increase in the pari-mutuel tax. However, in the long term, they are destroying racing by driving away customers.

Instead, lawmakers are looking at a study by the New Hampshire Grocers Association, which has consistently criticized the tax increases as hurting small businesses, particularly along New Hampshire's state line.

Again, a parallel to racing can be drawn. As California racing loses customers, all the ancillary businesses that serve the racing industry will suffer. A raise in pari-mutuel tax drives bettors away from California tracks and toward out-of-state tracks with lower takeouts.

[Robert Goren]

What is the pari mutual tax in California? I was not aware they had raised it. I know they raised the takeout rates in some pools, but I believe all of that money goes to purses not to the state coffers.

[DJofSD]

Hang in there Robert. Spring is just about here. The sap will start to run and your circulation will improve. More blood will make it into you brain.

[Robert Goren]

So, DJofSD, what is the California pari mutual tax rate? How much did it go up? I would really like answer.

[DJofSD]

Don't get so hung up on labels and where the monies go.

The point is revenues will increase when the "take out" is decreased. Even JFK understood this.

[highnote]

When it comes to the horseplayer's cost of making a wager I use "tax" and "takeout" interchangeably because the effect to a player is the same.

Also, in academic papers the "takeout" is often called the "pari-mutuel tax".

I probably read more of these than I should. :D

No matter what you want to call it an increase is bad for the game in the long term, in my opinion. You can look at many other industries and government agencies and can draw parallels.

[redshift1]

So, DJofSD, what is the California pari mutual tax rate? How much did it go up? I would really like answer.

I asked a similar question about taxes (takeout & tax on winnings) as they vary from state to state and most answers sounded like guesses. ???

[highnote]

Here is one definition of takeout:

Takeout is a tax on horseplayers.

It doesn't matter who the taxing authority is. An increase in the cost of making a wager is bad for horseplayers. What is bad for horseplayers is bad for racing.

There are three parties that are needed to have a horse race:

1.) Racetracks, 2.) Owners (and connections) 3.) Horseplayers.

It follows from the article linked at the beginning of this thread that if Horseplayers are adversely affected by a tax increase then Racetracks and Owners can not expect to benefit in the long term. Perhaps in the short term parties 1 and 2 can benefit, but not in the long term.

For a good list of pari-mutuel takeouts see the http://www.horseplayersassociation.org website.