Maryland Gov. Harry Hughes reached agreement with legislative leaders today on major points of a proposal to revitalize the state's thoroughbred racing industry by reducing taxes on wagering by about $9 million to make the money available for increasing purses and improving track facilities.

Hughes, who had been negotiating with General Assembly leaders for some time over the proposal, said he had reached a consensus with the legislature on the plan, but a number of fine points still remain to be ironed out, according to administration officials.

The racing plan, which includes some of the recommendations developed by the racing industry itself, would reduce the state tax on pari-mutuel betting from 4.09 percent of the total betting pool to .5 percent. The proposal would also include the industry's agreement to end racing at Bowie Race Course and allocate its racing days to Laurel and Pimlico.

The $9 million lost to the state would be retained by track owners, horsemen and breeders, with most of it intended to go for greater purses and track improvements.

The governor hailed the proposal, which is to be submitted soon to the legislature, as a major step "to protect the 17,000 jobs and millions of dollars in tax revenues made possible by racing" that have been jeopardized by aggressive promotion of thoroughbred racing in other states, particularly New Jersey.

Maryland's thoroughbred and harness racing industries together generate more than $905 million in business each year, according to a state study. In recent years, increases in the betting pool at the state's three mile-long thoroughbred tracks have not kept pace with rising expenses, and the industry has been demanding relief.

The legislature last year gave a significant tax break to the harness tracks, reducing the state tax to .75 percent of the betting handle from as much as 7 percent.

Race track officials and trainers today said the legislation, if adopted, would give their ailing industry a major shot in the arm and allow them to compete with New Jersey tracks, where the state currently taxes betting at .5 percent.

"That's a step in the right direction," said Al Karwacki, general manager of Bowie Race Track in Prince George's County, which is scheduled to close after its summer meeting. "If the General Assembly approves it this will prove to be the catalyst that makes Maryland racing competitive once again."

King T. Leatherbury, a leading Maryland horse trainer, called the governor's proposal "a fantastic move. Racing has been taxed more and more until we're against the wall. We absolutely had to have this to compete with Garden State in New Jersey when it reopens later this year."

Laurel owner Frank DeFrancis, who until recently served in Hughes' cabinet, said the tax break was "crucial" if Maryland tracks are to remain competitive. "We couldn't possibly continue to compete under the handicap" of a 4.09 percent tax, said DeFrancis, who pledged to spend his track's share on capital improvements and "ambience."

Hughes administration officials declined to reveal a number of specifics in the racing plan, including to what degree the state's two remaining thoroughbred tracks, Laurel in Anne Arundel County and Pimlico in Baltimore, would be instructed to allocate the money once the legislation goes into effect next July.

Aides to the governor were similarly vague about whether local jurisdictions would still receive their share of racing revenues. Local governments have generally received about $2 million per year in thoroughbred racing taxes.

"Those details are still being worked out," said Lou Panos, Hughes' press secretary.

Legislative leaders, during their negotiations with the administration, have been pressing for provisions in the legislature to ensure that the state will retain some control over how track owners spend their share of the $9 million.

House Speaker Benjamin L. Cardin today said "the overall problem -- money -- has been taken care of. The major sticking point now is accountability."