There should not be anything personal in any of this stuff - the arguments and issues going on are larger than any person. I do not really care about the politics of the change - I care more about either fighting the change or adapting to the change.
What is really frustrating to me is that by considering personalities and politics, we get distracted from what is actually happening. The truth is the one thing we all on this board can agree on is that we love horseracing and care about its future. That much we should all be able to agree to.
So let\'s focus on the threat to the thing we love. It is new tax. It seems there are only three possible responses - (a) fight the change and hope to succeed, (b) accept the change and then adapt to the new world (for me, this means only playing in a format that leaves no record, or only playing tournaments), or (c) put your head in the sand and then both you and the sport get runover by the steamroller at some point.
If we want the industry to survive, it seems like the industry needs to do either (a) or (b) (and work with its players to survive in the new world). Unfortunately, it looks like (c) is what is happening (and is the default of neither (a) nor (b) are pursued).
A long time ago, there were studies about the impact of take out on handle - and the studies showed that if you reduce the percentage of take, your gross take, in absolute terms, goes up. This is because of churn. If you give bettors back dollars instead of pulling them out of circulation, the bettors rebet those dollars and you get multiple attempts to take stuff out. The studies showed that churn was the really important factor. In real life terms, compare betting Superfectas at place that takes 30% out of the Superfecta pool with betting pick 5s with a 15% take. The difference is dramatic. There is no question what is sustainable and what is not. this new tax is going to dramatically reduce churn. This new tax is an absolute assault on churn. If I were a racetrack operator, I would be messing my pants because of what this does to churn.
Here is an example, lets say you bet $10,000 to show on prohibitive favorites in races with a negative show pool. Say you do this 20 times in a year, and lets say you go 19 for 20. In this scenario, you have cashed for $199,500 on wagers of $200,000. By most sane standards, you lost $500. Also, you don\'t really need a bankroll of $200,000 to bet the $200,000. In the worst case scenario - you lose you first bet and win the others, you only needed a bankroll of $20,000 to have a handle of $200,000 (see, the magic of churn).
Here is the problem -- according to the IRS, you won $199,500 and then you are allowed to deduct only 90% of your losses. What are you losses here? it is the single $10,000 bet you lost. So you won $199,500, you lost $10,000 but you are only allowed to deduct 90% of that or $9,000. According to the IRS, you owe tax on $190,500. At 30%, that means your tax bill is $57,150. Yes, in this scenario, you lost $500 on handle of $200,000 and you owe the IRS $57,150.
Would love to understand why my example is wrong. Would also love to know why racetracks think this is okay and that their horseplayers will keep coming back for this sort of punishment.
