LOUISVILLE, Ky. (WDRB) – Kentucky’s slots-like gaming industry will survive – or at least live to fight another day in court – after the House narrowly passed a bill aimed at legalizing “historical horse racing” following about three hours of passionate debate on Thursday evening.
The 55-38 vote split the supermajority Republican caucus. The GOP holds 75 of 100 seats in the House.
Some expressed moral opposition to gambling and societal damage, while other said the state’s signature horse racing industry cannot survive without the revenue from the slots-mimicking machines and job losses would be immediate.
Ky. House is back and looks to be about to consider historical horse racing bill. But it sounds like @reposborne says his members are demanding (!) that the state increase the tax rate on the machines: “I think everybody knows there needs to be some modification in the taxes” pic.twitter.com/4znzXZ80Z8
— Chris Otts (@christopherotts) February 11, 2021
Democrats supported the measure while lamenting that the lawmakers didn’t take the opportunity to raise taxes on the gaming revenue, instead promising to revisit the tax rate in 2022. Some Republicans agreed that the industry is under-taxed.
“It was emotional. There were debates. There was a lot of swaying of colleagues to go to one side or the other. But at the end of the day, the people were allowed to speak, and we need to be proud of that process,” said Rep. Al Gentry, D-Louisville, minutes after the body voted.
The bill now heads to Gov. Andy Beshear, who has vowed to sign it.
The vote ensures the immediate future of 3,625 gaming machines housed at six racetrack-owned venues around Kentucky. The facilities resemble casino floors with slots, but the machines claim to offer an exotic form of horse racing.
The state Supreme Court in September ruled that the machines don’t constitute pari-mutuel wagering, the sort of gambling that is legal in Kentucky while casinos are not. The decision forced the GOP leaders of the House and Senate to act on the issue despite how deeply it divides their members.
The bill passed the Senate earlier this week with Republicans divided 15-15 and 7 Democrats in favor.
More litigation is likely. The conservative Family Foundation of Kentucky, which has battled the industry in court for a decade, argues that only an amendment to the state constitution can legalize the machines.
‘A shameful tax rate’
Thursday’s debate revealed bipartisan support in the House for raising taxes on historical horse racing, and the state’s racetracks said they would be open to discussing a higher rate.
“I think everybody knows that there needs to be some modification in the taxes,” House Speaker David Osborne said after emerging from an hours-long recess in which leaders shored up votes for the bill.
But the bill advanced without any change in taxes, and Democrats said they fear the issue won’t be revisited now that lawmakers’ leverage is removed.
“I am very disappointed that we are not addressing what I believe is a shameful tax rate on historical horse racing, and I am going to take the speaker at his word that we are going to address it in the next session,” said Minority Leader Joni Jenkins, D-Shively.
Every dollar bet in the machines is taxed at a rate of 1.5%, which about half of the money going back to the horse industry through special funds that, for example, boost purses available to the winners of live races.
In 2019, a WDRB analysis found that the effective tax on Kentucky’s pseudo-slot machines was substantially lower than what border states charge on their casino slots.
The racetracks said in a joint statement Thursday that they will “work constructively to revise and raise the tax structure on historical racing machines, including consideration of a fair and equitable graduated tax structure. We look forward to those discussions in the near term and confirm our commitment to the Commonwealth to build on our tax and job base through sound capital investments and good corporate citizenship.”
Rep. Jerry Miller, an eastern Jefferson County Republican, said he agrees with Democrats: “This industry does not pay its fair share of taxes.”
Miller hopes lawmakers actually revisit the tax rate in 2022.
“I don’t want that promise ‘someday’. I want it at a time certain, and I want it next year,” he said.
