In a recent column, I told about a friend who said he doesn't object to lotteries operated by cities and states.
He does object to gambling ventures operated by private entrepreneurs because these undertakings drain much more from the public's pockets than ever find its way into public treasuries.
This was an argument I had not previously heard, so I printed it. Andrew Beyer took exception. Our racing maven wrote a rebuttal headlined, "Gambling Profits Only Just; Entrepreneurs Take the Risk."
The race track business is very bad, Beyer told us. In Maryland last year, "the three major thoroughbred tracks made a combined profit of $1 million. The state, meanwhile, took $18 million in tax revenue from racing."
Andy Beyer sometimes refers to himself as a "gambling degenerate," but he's really quite a nice young man. He justs gets a wee bit emotional about gambling, and at times ends up putting his fist through a wall. Other than that, he's just an average, even-tempered sports fan.
I can assure Andy that I do not need an indoctrination course to sell me on the joys of capitalism. I am already a confirmed risk-taker. I have lost my shirt on everything from oil exploration to information retrieval systems (ours wasn't as good as IBM's, alas!). I agree that when a risk-taker develops a product or service that meets a public need, he's entitled to a profit.
And heaven knows the race tracks have raked in very handsome profits. Bettors lost a cool million in the first three days of racing at Aqueduct. Half-mile tracks in Podunk don't do quite that well, but over the years race tracks have made huge profits, and risk-takers have been eager to get a piece of the action -- so eager, that some of them risk moving from the governor's mansion to a jail cell.
It is true that profits have plunged at all race tracks recently. Drug scandals and other shenanigans caused quite a few former horse players to raise their hands to heaven and promise, "Never again, or at least not very often."
Gasoline prices temporarily hurt attendance. Operating costs have soared because of inflation, but legislatures have been slow to raise the percentages cut from already bleeding mutuel pools.
So it's a bad year -- like one of the Washington Gas Light Company's bad years. You and I would love to have that much "off-year" profit to tide us over until things got better. I'd cry for the owners of Maryland race tracks except that I'm plumb out of dry handkerchiefs.
Inasmuch as Beyer brought up the matter of how much revenue Maryland collects from racing, I hope I can cite a few facts without causing distress to those who have already made up their minds about this issue.
Last year, 3,258,608 people paid to get into Maryland tracks. They bet $365,198,209, or an average of about $112 per person. If Mr. Average made 11 bets of $10 each, he lost $22 of his $112 -- every day.
Calculating what was taken out of the $365 million is complicated. The legislature permits thoroughbred mile tracks to cut 15 percent from win, place and show pools. It permits the extraction of 19 percent from two-horse bets (doubles and exactas) and 25 percent from triples. In addition, the track takes what is known as "the breakage," because it doesn't pay off in pennies. This adds at least 2.2 percent to the "take," probably more.
"Fairgrounds" (half-mile) thoroughbred tracks are permitted to cut 16, 19, and 25 percent from mutuel pools.
Harness tracks take 17, 19 and 25 percent. All of these percentages are "plus breakage."
The state gets a flat 4.09 percent of the money withheld.
To calculate how much of the $365 million is never returned to bettors, one would need to know precisely how much is bet on win-place-show wagers, how much on doubles, exactas, triples, harness races, etc. I do not have this information.
What we do know is that the absolute minimum cut is 15 percent plus 2.2 percent for breakage, or 17.2 percent. The maximum is 25 plus 2.2 or 27.2 percent. The overall average is probably more than 20 percent. This means at least $73 million was taken from bettors. Of this $73 million, the state received only $18,736,440.39. In other words, bettors had to lose about $4 for each $1 they put into the state treasury.
It is futile to argue that the other 75 percent of the money taken from the public's pocket improved the breed, paid purses to owners, provided for pensions to mutuel employees, or was diverted to track profits or other noble purposes. What matters is that if you want to raise revenue for the state, letting insiders obtain "risk-taking" franchises is not the most efficient way to do it.
As a person, I like Andy Beyer. He makes a nice salary and wastes little of it on food or women. I'd like to get him on a slow boat to China and let him name his best game. But as a logician, he's on a triple blitz.