IMPROVED PARI-MUTUEL TAXATION

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Abstract
Pari-mutuel wagering on horse racing is a major source of State revenue for the 30 racing states. New York State, largely under the stimuli of newly authorized off-track betting parlors, is closely examining the pari-mutuel tax which takes 17% of each betting pool to be divided between New York State and the appropriate racing association. This gross pool tax reduces winnings on favorites as much as 77% compared with as little as 17.1% for long-shot winners. If a 22% tax on gain (gross pool less amount bet by winners) were substituted, revenue to New York State and the racing associations would likely increase, while giving most bettors a more favorable payoff structure and taking some business away from illegal bookmakers. These effects result from a redistribution of payoff odds in favor of small sum winners.

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