Horse players are already being taxed to death, but Maryland is trying to drive another nail into their coffins.
Under a measure advocated by the Department of Revenue and being considered by the House Ways and Means Committee, Maryland would withhold 7 1/2 percent from any gambling payoffs that return more than $1,000 at odds of 300 to 1 or more.
At the race track, the withholding tax would apply mostly to triples. It would come on top of the 20 percent federal withholding tax. And both of them come on top of 25 percent "take" that the state and tracks extract from triple wagers.
That means horseplayers would be betting in the hope of getting back 47 1/2 percent of their own money. "Racing wold be as big a rip-off as the lotteries," said Arnold Kirkpatrick of the American Horse Council.
Yet Charles Spriggs, chief of the income tax division of the state comptroller's office, figures horseplayers are getting off too easy. "It's very difficult to collect tax from winners," Spriggs said. "When we get in touch with them, the money's already gone."
He estimated that the withholding tax would generate about $500,000 in revenue, $375,000 of it coming from race tracks and the rest from lotteries.
Another member of the comptroller's staff added. "There is a misconception that we're putting a tax on what is not taxable now. But winnings of this nature are taxable under Maryland law. When the Maryland tax laws were rewritten in 1967 the whole pattern was to base them after the federal tax code. The federal government requires a withholding tax and we're just putting Maryland in the same boat."
To government officials, this line of thinking probably seems completely reasonable, and the withholding tax perfectly just. But those officials don't understand racing. The gambling withholding tax would be economically counter-productive and grossly unfair.
There is a point when taxation of the racing dollar ceases to raise more revenue, and instead knocks horseplayers out of action. The New York Racing Association realized this fact of economic life when it launched an allout campaign to reduce the take at its tracks from 17 to 14 percent. Its business has boomed as a result. But few states have acted with such foresight as New York. The experience of Charles Town race track is a more typical illustration of the destructive aspects of taxation.
Charles Town derived much of its business from triples and other forms of exotic wagering. But when the state increased the take on these bets to 25 percent, and the 20 percent federal withholding tax went into effect, so many bettors defected that the track could not survive. Now West Virginis faces the possibility of losing millions of dollars in revenue that Charles Town once provided.
The worst aspect of the withholding tax is its sheer unfairness. Tax officials in Annapolis may have the notion that great numbers of horseplyers are beating the state out of rightfully owed revenue, but this is not the case.
The vast mafority of horseplayers -- even those who collect a couple of payoffs over $1,000 -- wind up as net losers for the year. Thus they have no tax liability. But when the government has already grabbed a percentage of their money, they must struggle to prove that they are entitled to get it back. Establishing that proof to the government's satisfaction is usually impossible.
The government often treats horse-players as if they have no rights, as if they are not entitled to elementary fair play. Maryland's horseplayers can only hope that the legislators in Annapolis do not hold this point of view.