As horseplayers returned to Suffolk Downs for the opening of racing season last weekend, grumbling about a new state gaming tax had some gamblers thinking of taking their business elsewhere.
All wagers resulting in winnings of more than $600, regardless of the amount wagered, are now subject to an immediate 5 percent withholding by the state, according to a May 20 announcement by the Massachusetts Gaming Commission.
That means people cashing in wins of more than $600 at racetracks around the state will have at least $30 deducted from their take.
“The tax has caused considerable consternation among our customers,” said Suffolk Downs chief operating officer, Chip Tuttle, who implemented the policy on June 1 with the start of the racing season.
The tax, intended to bring in additional revenue for the Commonwealth, may have the opposite effect, he said.
“All this policy is going to do is chase away our customers to New Hampshire, Rhode Island, and unauthorized betting locations where they’ll be able to wager in a more competitive environment,” he said.
The 5 percent tax was originally included in the 2011 Massachusetts Expanded Gaming Act, which allowed for the establishment of three resort casinos and a single slots facility in the state. It was unclear, however, whether the policy applied to winnings from horseracing, which had previously enjoyed an exemption from such withholdings. After Suffolk Downs and other racing associations requested clarification, the Massachusetts Department of Revenue directed horsetracks to start withholding the tax this season.
The 5 percent tax has applied to lottery winnings of more than $600 since 2011, and when casinos open in Massachusetts, the tax policy will be implemented on winnings there as well.
“This is very simple — all forms of legalized wagering in the Commonwealth now have the same rule that is consistent with the [Internal Revenue Service’s] rules,” said state Senator Stanley Rosenberg, an Amherst Democrat and one of the architects of the 2011 Gaming Act. He added that there is no reason that winnings from horseracing should continue to be excluded from withholdings.
“Now that we’ll have all three kinds of winnings,” from the state lottery, horseracing, and casinos, “it makes sense for the tax to be fairly and equally applied.”
Anthony Spadea, president of the New England Horsemen’s Benevolent and Protective Association, has been racing and breeding horses since 1966. He says that the tax will end up causing the state’s horsetracks to lose business.
“We’ve made a law that is going against what everybody is trying to accomplish, which is trying to improve and enlarge the sport so we can gain more open space, more jobs, and make purses to keep racing alive,” he said at the Suffolk Downs Clubhouse.
There are existing tax policies for exotic wagers, such as bets on the finishing order of several horses or bets on horses that are long-shot winners. Such wagers can produce huge payouts in the rare event of a win. The new 5 percent tax, however, applies to any winnings, no matter the odds. An example: winnings from a $100 bet placed on a horse with 7-to-1 odds; a $20 bet on a 35-to-1 longshot; or even a $1 bet on a 700-1 “trifecta” — a bet on the order of the first three finishers
Already, gamblers are looking for ways to circumvent the tax. Tuttle said that the new tax may encourage people to split up wagers in order to avoid the $600 threshold.
That means that instead of betting $100 dollars on a horse with odds of 12-1 which could bring in $1,200 in winnings, a gambler would make ten $10 bets on separate tickets, each with the possibility of $120 in winnings, and not subject to the tax.
“It’s going to cause the track’s tellers to have much more paperwork — forget about the amount of money they’re going to have to spend on buying paper and printing tickets,” said Brian Abboud, a horseplayer and industry consultant from Marblehead.
“It’s an obvious loophole that encapsulates the unintended consequences of the provision,” Tuttle added.
“If they don’t change the law before they start the casinos, people just won’t come,” Abboud said. “It’s a preposterous law that has no overall benefit.”
The Massachusetts Gaming Commission plans to hold a public meeting later this month to form an opinion on the tax’s impact on the horseracing industry, according to spokeswoman Elaine Driscoll.
The new Massachusetts provision is similar to a New Hampshire gambling tax passed in 2009 that took 10 percent of winnings over $600. After heated pushback and losses at the state’s horsetracks in the tens of millions, that tax was repealed in May 2011.Alyssa A. Botelho can be reached at firstname.lastname@example.org. Follow her on Twitter @AlyssaABotelho.