An amendment that could have important ramifications to the racing industry has been proposed by Rep. Bill Frenzel (R-Minn.). It would increase the federal withholding tax on certain large gambling winnings from its present 20 percent to 28 percent. Another amendment before Congress by Frenzel might apply a small federal excise tax to tracks' revenues.
The withholding tax, even at its present 20 percent level, has been assailed for years by leaders of the racing industry. Last year the government withheld some $80 million at parimutuel establishments.
This proposed change comes in the form of an amendment to the Small Business Tax Incentive Act of 1990, which is now being considered by the House Ways and Means Committee. Frenzel had offered a change in current tax laws dealing with charitable gifts of appreciated property, one that would have reduced tax revenue, so under the budget process he had to offer a way to generate revenue too.
"We looked for revenue offsets and we looked at the gambling area," said Scott Peterson, Frenzel's legal assistant for tax matters. "The current tax rate is 28 percent and this would merely increase this withholding to the full rate."
Frenzel proposed another tax change dealing with charitable gifts and looked for the offsetting revenue in another gambling-related area. There is now a federal excise tax of .025 percent that applies to certain gambling activities (such as bookmaking in Las Vegas) but exempts parimutuel wagering. Frenzel's amendment, according to his aide, would "broaden the base for gaming subject to the excise tax," and that broader base could possibly include racetrack wagering, depending on an analysis of the issue by the Joint Committee on Taxation.