Did Secretariat Need a Government Subsidy?

October 18, 2005

As casino gambling made its way into St. Louis, one industry has lost business—the local horse racing track. So what do the tracks want in return? A tax on casinos that funds a subsidy to themselves. From today’s St. Louis Post-Dispatch:

At Fairmount Park, the effect of a decade of casino competition is spelled out in shorter weekly horse racing schedules, and counted out in lighter purses.

Now, Fairmount and the rest of Illinois’ horse racing industry want the casinos to pay for that lost business. Legislation, to be presented in Springfield next month, would require a 3 percent tax on casino revenue, to be used to fatten race purses and spur horse racing in Illinois.

State Rep. Bob Molaro, D-Chicago, next month will push for what he calls “the 3 percent solution.” Under the legislation, each of the state’s nine casinos, including the Casino Queen in East St. Louis and Argosy Casino in Alton, each year would have to give up 3 percent of their adjusted gross revenue (their income after paying out winnings but before any other expenses).

The money – an estimated $60 million to $100 million a year – would go into an “equity fund” to help bolster horse racing. In exchange for that cost, the legislation would offer the casino industry an increased number of allowable gambling positions to 3,000 per casino, up from the current 1,200 limit.

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This is a classic case of an incumbent business seeking protection via the tax code, limiting competition at the expense of consumers.

Legalized gambling is controversial. But for one firm to argue that ensuring quality horse racing is a proper role of government—and in the process penalize competitors for doing a better job pleasing consumers—is a pretty disingenuous argument, and clearly rewards a special interest at the expense of the public interest.

If “quality” horse racing is the goal, why not extend the horse racing industry’s logic (of opposing free competition) to the races themselves? That is, why not give a head start out of the gate to slower horses, and force their jockeys to carry an extra 30 pounds? Won’t that ensure a quality race?

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