10/13/2004 11:00PM

Great start - now fix taxes at home

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NEW YORK - Two cheers for the National Thoroughbred Racing Association's success in getting a bill through Congress that will repeal the 30 percent withholding tax on winning wagers made by foreigners in American parimutuel pools. The regulation was a major impediment to getting worldwide participation in American racing, and forced even Canadian tracks to form their own betting pools on popular signals from just over the border.

The third cheer awaits a similar effort to take care of an even more burdensome tax issue much closer to home, the ongoing abuse of American horseplayers through unjust and punitive withholding and reporting requirements. The industry needs to spend as much or more time and effort making the case that current tax regulations, as well as being fundamentally unfair, are almost certainly costing government millions of dollars by taking gambling money out of circulation and driving some of racing's very best customers out of the game.

By confiscating a portion of gross payouts on exotic bets, regardless of whether a horseplayer is showing a profit for the year or even for the day, the government depletes available bankrolls and creates a climate of fear among bettors. Hundreds of millions of dollars in payoffs are needlessly and fruitlessly subjected to withholding and reporting requirements that amount to a charade. Probably 99 percent of the people who have to sign W-2G forms in the course of the year end up breaking even or worse and are entitled to a full refund. The few people who make a profit should be able to pay estimated taxes on their real net income, like citizens in any other endeavor.

The thresholds for tax reporting and paying are ridiculously low in a game where more than 70 percent of the handle is on multiple bets and where 300-1 payoffs are commonplace on any racing card and rarely the result of a windfall on a single $2 wager. Raising these trigger points to something like $5,000 for reporting and $25,000 for withholding would provide an immediate and significant economic stimulus to the industry through higher handle and churn, and bring back heavy hitters who have left in frustration.

The idea of opening American pools to a new international market is an exciting one that could prove beneficial to American bettors, especially if the new money comes from uninformed soccer hooligans rather than program traders from Hong Kong. The industry, however, owes it to the existing suppliers of $15 billion a year in handle to do something about the biggest hurdle to growth in the domestic market.

World rankings still a joke

If the NTRA needs a few more lobbying dollars for the tax-reform effort, it could begin by diverting any pennies it is spending on its increasingly bizarre and insulting World Thoroughbred Rankings. The final set of these theoretical handicap weights for the upcoming Breeders' Cup races was released Wednesday and bears little relation to reality.

The effort by a committee of American and foreign racing secretaries to assess the relative merits of European and American candidates for the Cup has been a widely criticized failure since its inception two years ago. The Europeans are allowed to run wild with unfounded opinions about the superiority of their horses, and the rankings of Americans do not seem to reflect common sense.

For example, did you know that you can go ahead and single Rebuttal and Divine Proportions in the Juvenile and Juvenile Fillies? Europeans are 2 for 40 in the 2-year-old Cup races (Arazi and Johannesburg), but Rebuttal is rated atop the Juvenile candidates at 120 pounds, three more than Afleet Alex and Roman Ruler. A French filly named Divine Proportions is supposedly even more dominant, rated at 117 pounds to Sense of Style's 113 among the 2-year-old fillies.

How has Rebuttal attained his clear margin over a good crop of American 2-year-olds? By amassing a mighty 1-for-4 record in Britain without racing beyond six furlongs. On what planet does that make him an inch better than any American stakes winner, much less 12 pounds better than Consolidator, winner of the Grade 1 Breeders' Futurity?

It doesn't get much better when you remove the Europeans from the equation. How many pounds are there between Pico Central and Speightstown among the sprinters? Reasonable people could argue whether it should be closer to two or five. Pico Central has won three Grade 1 races this year (Carter, Met Mile, and Vosburgh) while Speightstown has won none. Pico Central beat Speightstown by 4 1/2 lengths at level weights in their lone heads-up meeting, in the Vosburgh. The spread between them? On the World Thoroughbred Rankings, they're inexplicably rated in a dead heat at 122 pounds.

There are some smart and competent American racing secretaries involved in this process who are clearly being outvoted by Europeans who don't understand American racing. How can the Breeders' Cup and NTRA put their names on the absurd final product?