Kentucky could be missing out on millions by not taxing betting uniformly.
That's according to left-leaning Kentucky Center for Economic Policy.
The group says if the state taxes new forms of racing betting at a higher rate, Kentucky's General Revenue Fund could see at least a $40 million boost in revenue.
Live race wagering used to be the primary way people bet on races. Now, an increasing number of bettors are turning to instant wagering machines and advanced deposit wagering (ADW).
Instant wagering machines are similar to slot machines. And ADW allows mobile betting.
KCEP says as these two forms of betting increase in popuilarity, the taxes should rise accordingly.
According to Pam Thomas, a Senior Fellow with KCEP, the tax rate for tracks varies depending on how much is bet. If the amount is less than $1.2 million, revenue is taxed at 1.5%. If the amount is higher than $1.2 million, it's taxed at 3.5%.
"What we are proposing is that instant wagering be taxed at 3.5%," Thomas said. "And simulcast wagering is taxed at 3%, and ADW, advanced deposit wagering, is very similar to that, and so our proposal is to tax that at 3%. Right now, it's taxed at 0.5%."
Instant wagering machines allow people to bet 365 days a year, and with race tracks rapidly adding more machines the estimated $40 million in revenue could be conservative.
"I think that number is going to grow fairly quickly to be beyond that because more machines are being added," said Thomas. "Derby City just opened in September and they have 900 machines, and they have approval to add 100 more, which I think they plan to do in the next few weeks, and then Keeneland and Churchill have been approved to do this joint facility in Oak Grove, which is down near Fort Campbell, and they plan to have 1,500 machines. The more machines that come online, the more money will be generated and the more money that will bet. So I think what you'll see is that the growth in revenue from that particular form of wagering is going to grow."
Currently, two thirds of the revenue from taxes goes right back to the horsing industry for things like breed funds, backstretch funds, education funds for equine education and other programs. With an increased tax, KCEP says the taxpayers of Kentucky could also benefit from the burgeoning form of betting.
"What we're proposing is to add this new rate on top so that the growth that is happening for the tracks is continuing to happen and the base would continue to grow and they continue to get more money as more machines are installed and more revenues are raised," Thomas said. "But, what we're proposing is just tax it like you tax live betting and give the new levy, which for the instant racing machines would be 2%, give it all to the general fund and let the people of the commonwealth overall benefit from this."
Spectrum News 1 reached out the horsing industry and Churchill Downs Incorporated for their thoughts on the proposal but did not hear back.
The report can be found here.