Winter weather has canceled 12 programs during the current Shenandoah Downs meeting. Now comes the power shortage, and the local track is reduced to racing four nights a week, Wednesday through Saturday, with the number of races cut from 10 to nine on week nights and from 13 to 10 Saturdays.
But that's not the worst of what is happening in wild, wonderful West Virginia. The worst is the 20 percent federal withholding tax on parimutuel wagering which went into effect May 18.
Race tracks throughout the nation are feeling the adverse affect of this tax being taken out at the source. What used to be a $1,000 payoff, after the bettor signed a W-2 form, is now an $800 payday, the tax money having been deducted at the cashiers' windows on return of 300 to 1 or higher which amounts to $1,000 or more.
"The withholding tax is hurting all the tracks but it's really murdering the small ones like us," General Manager Bill McDonald said yesterday. "A comparison of last Saturday's figures with those of the Saturday the year before tell the story. Our Big Exacta on the fifth race last Saturday attracted $24,900 on win, place and show The Big Exacta attracted $22,700. Before the money was withheld the percentage would have been 60-40, with the Big Exacta accounting for the higher figure.
"On Feb. 12, 1977, the Big Exacta did $28,722 compared to $24,202 on the win, place and show."
The betting figures on the Jackpot in the last race, in which the bettor is asked to select the first four finishers in order, are down even more.
"The jackpot last Saturday did $22,000 and the win, place and show on the race was $24,100," McDonald said. "The same race figures for Feb. 12, 1977, showed $26,166 on win, place and show and $39,636 on the Jackpot.
"This is where were are really getting killed. The money that used to be bet on the Jackpot isn't being bet anywhere. Those poeple have left."
Accordingly, McDonald announced yesterday that there will be no Jackpot on the last race at Shenandoah starting tonight. There will be four trifectas, four exactas, the daily double and the Big Exacta. The nine-race cards will offer four trifectas, three exactas, the daily double and the Big Exacta.
Thus far, Charles Town and Shenandoah have withheld $827,500 in mutuel payoffs. This represents a tremendous decrease in the amount of money the fans have left to bet at the tracks.
For many years managers of American tracks have estimated the turnover of betting dollars on a single program to be 3.5 - that a dollar was bet and rebet by other players during the program 3 1/2 times. Thus the actual dollars involved at a track on any given day are between one-third and one-fourth of the daily total handle.
This means the two local tracks are $2,900,000 "short" in terms of the money which would have been available for betting.
Charles Town and Shenandoah are illustrative of what is happening to American race tracks nationally. Except that because these smaller tracks depend more heavily on the "exotic" wagering, they suffer proportionately more.
The Treasury Department estimated it would collect $110 million from this supposedly painless tax during a calendar year. The American Horse Council has done a study which indicates that figure will be less than $80 million. The Horse Council contends that the pari-mutuel handle will decline more than $270 million a year because of the tax. This will mean a loss of nearly $14 million in purses, $16 million to the tracks and $17 million in tax revenue to the racing states.
The Internal Revenue Service reportedly is studying the effects of the 20 per cent withholding tax.There is concern on Capitol Hill that the tax aids illegal wagering activities (with bookmakers) while reducing state revenues from the sport, effects that are contrary to the intent of the legislation.
If the IRS investigators are looking for a good place to start their study they need travel no farther than here. The effect of the tax on the business at these two tracks has been devastating.