07/29/2008 11:00PM

Bill would eliminate withholding tax

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Rep. Charles Boustany Jr., a Republican from Louisiana, has introduced a bill in the U.S. House of Representatives that would eliminate the withholding tax on parimutuel winnings of $5,000 or more for bets that pay off at odds of greater than 300-1.

The elimination of the withholding tax has been pushed by the National Thoroughbred Racing Association for several years, but lobbyists for the organization have not been successful in finding a sponsor for a stand-alone bill until now.

It is unclear whether the bill will find widespread support. Many legislators have been reluctant to take up the elimination of the tax because of concerns that the effort would be perceived as a handout to horseplayers. In addition, the current threat of a recession may put pressure on legislators to reject any measure that would reduce tax receipts.

Peggy Hendershot, the NTRA’s senior vice president of legislative affairs, said on Wednesday that the NTRA plans to commission an economic study that would support the position that elimination of the tax would have a positive economic effect on the racing industry at large. In addition, the NTRA plans to tell legislators that the parimutuel industry is the only gambling business that is subjected to an automatic withholding on winnings wagers.

“When we point that out, the response has always been, ‘That’s inequitable,’” Hendershot said.

The tax requires 25 percent of any bet paying $5,000 or more at odds of greater than 300-1 to be automatically withheld from the payoff. Horseplayers have long criticized the tax for failing to take into account the total amount of money that is typically wagered on exotic bets. Racetracks are critical of the tax because it reduces churn, or the amount of money from winning bets that is wagered back into the pools.

The legislation would eliminate the tax and add parimutuel wagering to a section of the tax code that exempts other gambling games like bingo and keno.

Congress is scheduled to recess at the end of this week and is not scheduled to return to session until September, prior to taking a break for campaigning for the November elections.

Hendershot said that the NTRA hopes to have its economic study completed by the time the legislature returns in September. In the meantime, racing-industry lobbyists will ask legislators to co-sponsor the bill, Hendershot said.