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A Taxing Issue: Historical Horse-Racing Slot Machines

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In 2020, the Historical Horse Racing slot machines brought in $189 million in gross commissions for the industry, but only $15 million ended up in Kentucky's General Fund. (Adobe Stock)
In 2020, the Historical Horse Racing slot machines brought in $189 million in gross commissions for the industry, but only $15 million ended up in Kentucky's General Fund. (Adobe Stock)
 By Nadia Ramlagan, Public News Service - KY - Producer, Contact
February 12, 2021

FRANKFORT, Ky. - State lawmakers will soon decide the fate of historical horse racing in the Commonwealth - and some experts say if this type of slot-machine gambling becomes legal, it should be taxed at a higher rate.

Historical horse racing allows players to place bets on the results of thousands of past horse races, and this type of gambling machine has exploded in popularity in the past decade.

The six casino-style locations scattered across Lexington, Louisville and Northern and Western Kentucky operate 3,600 machines.

Jason Bailey, executive director of the Kentucky Center for Economic Policy, said people spend billions of dollars a year on slots, but the state is receiving little tax revenue in return.

"I mean, the tax is 8% in Kentucky, and it's 30 to 60% in other states on slot machines," said Bailey. "So, that's the issue. And these are slot machines; historical horse racing is a branding exercise to sell slot machines."

The state Supreme Court recently ruled historical horse racing doesn't meet the definition of traditional sports betting and therefore is illegal, but some lawmakers and supporters say the games are critical to buoy Kentucky's horse industry.

They're pushing for legislation that would allow Historical Horse Racing to continue.

Bailey pointed out that three times more money is bet on historical horse-racing slot machines than on lottery tickets, but the lottery rakes in nearly 20 times more tax revenue.

"Kentuckians are gambling on these machines at high volumes," said Bailey. "The numbers are growing dramatically every year. But the money's not coming back into our schools, our public services, our healthcare. It's going to profitable casino corporations that are making money hand over fist."

American Gaming Association data show nearby states - like Ohio, Pennsylvania and West Virginia - tax their slot machines at rates four to seven times higher than Kentucky. More than 20 statewide advocacy groups are asking legislators to increase the tax rate on historical horse-racing games.

Disclosure: Kentucky Center for Economic Policy contributes to our fund for reporting on Budget Policy & Priorities, Criminal Justice, Education, Social Justice. If you would like to help support news in the public interest, click here.
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