04/07/2006 12:00AM

Wasting your tax dollars


NEW YORK - If racing fans would like to feel even worse about filing their tax returns, they should consider how their tax dollars were being spent last Wednesday at a congressional hearing in Washington, D.C.

The hearing before the House Judiciary's Committee on Crime, Terrorism and Homeland Security was prompted by the most recent incarnation of Rep. Bob Goodlatte's (R-Va.) annual attempt at anti-gambling crusading through his proposed Internet Gambling Prohibition Act. Goodlatte's bill, like its frequent Senate counterparts from Sen. John Kyl (R-Ariz.), would prohibit American banks from processing wire transfers and credit-card transactions to fund wagering accounts.

The hearing included testimony from the likes of John Warren Kindt, a University of Illinois professor and a fixture at such hearings, who compared horse racing to illegal drugs and believes gambling facilities should be converted into educational centers. This is not someone you would expect to find on the same side of public-policy issues as the racing industry.

Sometimes tacitly and sometimes vocally, however, the racing industry has supported various versions of this legislation because it supposedly creates a "carve-out" for existing account-wagering and simulcasting. Goodlatte's current bill contains such exemptions, and he further argued that it would not overturn previous legislation such as the Interstate Horseracing Act, which some people believe protects the interstate wagering that accounts for nearly 90 percent of the parimutuel handle.

That belief, however, is not shared by the nation's top law-enforcement agency. Bruce Ohr, the chief of the Justice Department's Organized Crime and Racketeering Section, reiterated at the hearing that the Justice Department believes all current interstate betting on horse racing is illegal under the Wire Act. Ohr then added the alarming new detail that his unit is currently conducting a "civil investigation" of the legality of interstate simulcasting and wagering.

Such an investigation is as absurd as Goodlatte's bill. It is the clear intent of every racing state and the Congress to permit interstate simulcasting and account-wagering as currently conducted. The technical issues of whether the Interstate Horseracing Act trumps the Wire Act and how the Goodlatte bill would affect either is an entirely academic squabble that amounts to nothing but a waste of public funds and government resources.

Rather than being drawn into such a debate and trying to get preferential treatment under a wrongheaded piece of legislation, racing should be joining the sensible chorus of gambling interests and enlightened legislators who acknowledge that eliminating Internet wagering is an impossible task and that bills like this have the potential to jeopardize racing's future.

Adjust takeout upon cancellations

The same afternoon as the hearing, Aqueduct had to cancel its card after three races when the jockeys said it was unlikely they could finish riding the entire program because of messy track conditions caused by a freakish one-hour April snow storm. With more than $800,000 in the pool for a pick six that was about to start, management decided not to risk aborting the sequence after a few legs, which would have infuriated bettors.

Unfortunately, this still meant terminating a pick four and two pick threes in midstream, paying off the pick four starting with the second race as a 1-1-all-all, the pick three starting with the second race as a 1-1-all, and the pick three beginning with the third race as a 1-all-all. This is fairer than refunding everyone's money, because it awards something to those who had made correct selections early in the sequence with the proceeds from those tickets that were dead regardless of how many more races were run.

What wasn't fair was paying out these pools at the 25 percent takeout rate on pick threes and pick fours rather than at the lower rates that govern what these bets had become: daily doubles on the bets that began with race 2, where the takeout should have been 17 percent, and a win bet on race 3, which should have been taxed at 15 percent.

The disparity was obvious from the payouts. The third race winner, Saalb, paid $5.40 to win, but the 1-all-all pick three beginning with him paid only $4.70, the result of the difference between a 25 percent and a 15 percent takeout.

The State Racing and Wagering Board has correctly made other changes regarding late scratches and surface switches to protect multirace bettors. It now needs to make another saying that takeout rates will be adjusted to reflect the actual bet type that a wager has become after races are canceled. Otherwise, it is condoning offering win betting at both a 15 and a 25 percent takeout and raising the takeout on a daily double from 17 to 25 percent.