Kentucky Lawmakers May Raise Taxes on Historical Horse Racing Machines

Lawmakers in Kentucky are discussing the option of raising taxes on the state’s well-known historical horse racing (HHR) games. These are machines similar to slots and bases the results on races that have already run. Although they have been operating in the state for more than 10 years without any setbacks, it wasn’t until last year when the legislature officially sanction them. Before that, HHR machines were facing a lot of legal challenges.

Some Conservatives Are Opposing Gambling

The debate over HHRs has proven to be an issue due to the fact that Republicans are actually divided in the 2021 state legislature. While some are supporting it, there are those that oppose gambling generally out of religious grounds.

With the help of the Democrats, the GOP-led statehouse managed to pass the bill. Only 36 Republicans voted in favor of it, in a House of 100 members. Many of them advocated for higher taxes so that more money can be brought in for the ailing coffers in Kentucky.

University Teachers Think that The Tax Bump Won’t Do Much Good

A professor from the University of Louisville shared a few words on the plans to bump the tax during a Monday legislature hearing. The professor stated that the financial windfall that some lawmakers are hoping for might not be reached with the increased tax rate on HHR machines.

Thomas Lambert, a UofL College of Business professor, said that the increased tax might have a negative effect, as it would lead to a decline in the number of patrons. Many Kentucky organizations support the professor’s thoughts, which is why they stated that the tax increase is inadequate.

Lambert shared his knowledge on the matter and said that by increasing the tax rate, operators will be forced to lower the payouts to the patrons and thus, the patrons will end up going to other gambling facilities located in Indiana or Cincinnati.

He added that gambling is the product of the economic concept called elasticity – an increase in the price of a certain product leads to a decline in its demand. 

The increase in tax concerning historical horse races has been discussed this year by legislators in a special committee known as the Pari-Mutuel Wagering Taxation Task Force. Sen. Damon Thayer, the co-chair of the panel and a Georgetown Republican, is not in favor of increasing taxes. He stated that even if the committee does something in any of the future sessions, the general fund will still get more revenue. He calls this process growth, economic opportunity and jobs. If more venues offer the machines, more new jobs will be created and more taxes will be paid.

Kentucky’s Major Racetracks Control the Historical Horse Racing Industry

HHR machines are owned by the major racetracks in Kentucky – Red Mile, Churchill Downs and Keeneland. Moreover, five racinos have opened up shop across the state. One of those racinos is being planned to pop up in downtown Louisville and its construction was announced last week.

A WDRB analysis showed that Kentucky’s tax of 18% on HHR machines is just a fraction of the tax rates of Indiana (27%) and Ohio (34%). In 2020, Kentucky generated $15 million in taxes from the segment, which some critics have stated that it is too low because the total handle was $3 billion.

During the legislative session this year, 17 organizations, such as the Kentucky Coalition Against Domestic Violence, the Kentucky Education Association and the Kentucky Mental Health Coalition, urged lawmakers to raise taxes on these games.