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In West Virginia, CATs and Dogs Living Together

2 min readBy: Jared Walczak

As West Virginia’s budget standoff drags on, an old flashpoint has reemerged: greyhound racing.

West Virginia is one of six states where greyhound racing is legal. Yet greyhound racing apparently can’t pay its own way. The state’s solution is to subsidize dog racing to the tune of $14 million, which covers up to 95 percent of the purse money kennel operators claim when their greyhounds win or place in races. Under current law, two casinos are obligated to offer greyhound racing as a condition of maintaining their gaming licenses.

Back in April, Governor Jim Justice (D) vetoed a bill that would have ended the subsidy and eliminated the requirement that the Wheeling Island and Mardi Gras casinos maintain their greyhound racetracks. “Eliminating support for the greyhounds is a job killer and I can’t sign it,” the governor stated in a news release accompanying his veto, following it with a tweet reading, “We can’t turn our back on dog racing in WV!”

On Monday, new legislation was introduced in a renewed attempt to end the subsidy.

Government and industry officials estimate that yanking the subsidy would result in a loss of 1,100 to 1,700 jobs. It is perhaps worth remembering, when evaluating other economic development claims, that even massive subsidies for dog racing have been justified as a legitimate economic development expenditure.

A study commissioned by the West Virginia Department of Revenue didn’t agree, noting that attendance has fallen by 99 percent since 1983 (there are now an average of 50 patrons a day), and the total amount wagered on greyhound racing ($15.8 million in 2013) is scarcely more than the amount the state spends on purse subsidies. There is taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenue associated with greyhound racing, but the study noted that it barely covers the state’s expenses for regulating the industry.

The $14 million the state spends on dog racing may not seem like much, but that brings us to a different kind of animal. For months now, Governor Justice has been advocating for the adoption of a commercial activities tax (CAT), a gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. modeled on Ohio’s. There is broad agreement across the spectrum that gross receipts taxes are unusually economically destructive, and most states have abolished them (including West Virginia back in 1987).

Larger proposals having been rejected, the governor is now pushing a CAT that raises a mere $12 million—less than the amount the state spends underwriting the dogs at two Wheeling casinos. We’ve heard a lot about the need for compromise in West Virginia, but surely this isn’t what anyone meant by CATs and dogs living together.