The nation's horseplayers came very close to gaining a long-overdue measure of tax relief in the Senate this week, only to lose the legislative equivalent of a photo finish.
An amendment proposed by Kentucky's two senators would have reduced the 20 percent withholding tax on certain gambling winnings to 15 percent, and for a time it seemed likely to be included in the final version of the bill. But on Tuesday it was stopped because of the objections of a single senator.
One might expect that the culprit would be a Bible belter who knew or cared nothing about the needs of the racing industry or its customers, but this was not the case. The archenemy of America's bettors is a senator who represents the patrons of Monmouth Park, Garden State, the Meadowlands and Atlantic City -- Bill Bradley (D-N.J.).
The racing industry has been trying for years to do something about the 20 percent withholding tax, which is extracted from winnings of more than $1,000 when the odds are 300 to 1 or greater.
Not only is withholding discriminatory -- it treats betting like no other financial activity -- but the $1,000 threshold is unrealistically low in this era of exotic wagers that require large investments. It is not uncommon for a syndicate to invest $3,000 in a Pick Six, collect a $2,000 payoff and be forced to turn over $400 of the "winnings" to Uncle Sam. Moreover, withholding takes out of circulation millions of dollars that otherwise would be wagered again and again, generating revenue for the tracks and taxes for the state.
Because the Senate bill would reduce the tax rate for most Americans to 15 percent, it seemed logical to reduce race-track withholding to the same level. So, Sens. Mitch McConnell (R-Ky.) and Wendell Ford (D-Ky.) introduced amendment No. 2113, which would make the change and lower the level for withholding on lottery winnings from $5,000 to $2,500. "That made it revenue-neutral to the government," McConnell said. "I thought it was fundamentally fair."
Because this was such a small part of a major bill, McConnell said that he and Ford had no intention of bringing it up for a voice vote. They adopted the same procedure that advocates of other minor amendments used, and attempted to "clear" their proposal informally with their colleagues -- that is, to make sure that nobody objected to it. If there was no opposition whatsoever, McConnell would bring the amendment to the floor, and it would be passed by a quick voice vote.
The American Horse Council was working with the senators and their staffs to allay any possible objections, and the organization thought it had an excellent case. "We could argue that this was not a gambling issue," said Tom Aronson, the director of legislative affairs. "This was a tax-equity issue."
Sen. Howard Metzenbaum (D-Ohio), a self-appointed watchdog on all the amendments being offered to the tax bill, had made known his objections to the withholding measure, but McConnell made his case and Metzenbaum changed his mind early Tuesday afternoon. At that point, Aronson said, "We were literally on the doorstep."
But in the final hours before the vote on the tax bill, Bradley let McConnell and Ford know that he was opposed to their amendment -- and the chances for a 15 percent withholding tax died a swift and quiet death. A spokesman for Bradley said, "The senator's position was to resist as many amendments as possible."
But Bradley's objections to gambling evidently are well-known. In a recent issue of Fortune magazine, a columnist wrote, "Every time we try to remind Bill Bradley that the economy of a major seaside city in his state depends on bettors entitled to some tender loving tax reform, he acts as though he is talking to some kind of fanatic."
After the Senate bill was passed, Bradley extolled its reduction of the tax rates and its fairness, but he should have added: "Except for horseplayers."