Kentucky Senate passes bill reducing breakage to a penny on winning bets
The Kentucky Senate on Tuesday overwhelmingly passed a bill that requires penny breakage on winning payouts and subjects all pari-mutuel wagers on races at the state’s tracks to a 1.5 percent tax.
The Senate passed the bill, which had already been approved in the House, by a vote of 33-1, with one abstention. The bill was heavily supported by the racing industry and is expected to be signed by Gov. Andy Beshear.
For bettors, the legislation will reduce breakage from the nearest 10 cents for every dollar wagered to a penny, which will lead to higher payouts. Breakage is the practice of rounding payouts to make the physical distribution of winning bets quicker, and most racetracks break payouts to the nearest 10 or 20 cents.
The legislation also sets a 1.5 percent tax rate on all bets made on Kentucky races regardless of the source. While the 1.5 tax is a reduction for some types of bets, wagers made through account-wagering operations were previously taxed at 0.5 percent.
The 1.5 percent tax also applies to handle on historical horse racing machines, which are devices similar to slot machines. Last year, the Kentucky legislature narrowly approved legislation explicitly authorizing the operation of the machines at Kentucky tracks after Churchill Downs Inc. agreed to support the establishment of a committee to analyze tax rates for the machines. Several opponents of the measure contended the tax rates were too low.
The committee ended up recommending that the tax rate for the machines remain at 1.5 percent. Subsidies from the machines have led to double-digit annual growth rates in purses at Kentucky tracks over the last several years.