The following appeared in Bloodhorse.com and was written by Frank Angst
The industry’s economic indicators for 2017 suggest changes to tax rules regarding withholding and reporting of large pari-mutuel winnings helped fuel a handle increase, and because the change didn’t make its impact until late in the year, greater handle growth should be expected in 2018.
Total handle on United States races in 2017 improved 1.59% to more than $10.9 billion, marking the biggest year-to-year percentage increase in handle in 16 years. It’s the third straight year that handle has increased.
While handle was up 1.59% for the year, it improved 2.32% in the final quarter (compared with the final quarter of 2016) and 3.85% in December (compared with December 2016.). That increased growth later in the year suggests that the tax changes put in place in late September are making an impact.
The new tax rules change how the 300-1 threshold—used to determine when tax reporting or withholding of big payouts begins—is defined on exotic wagers where players typically include multiple combinations. Previously, the 300-1 odds were based on each individual ticket as opposed to the total cost of a ticket. This new definition has greatly reduced the number of winning tickets that require reporting or withholding, effectively keeping more money in players’ hands.
“The Equibase report of positive gains in wagering for the third year in a row is another positive economic indicator for Thoroughbred racing and breeding,” said NTRA president and CEO Alex Waldrop. “Strong wagering gains for the fourth quarter also correlate with reports of a 95% to 98% reduction in the number of W-2G filings for the latter part of the fourth quarter.
“With a robust economy, significant changes to the tax code for most, and a full year operating under the new withholding and reporting regulations enacted in late September, we are optimistic these positive wagering trends will continue in 2018.”
The 2017 gains in handle came despite a 2.06% decline in race days to 4,573. Putting those two stats together means that wagering-per-race-day improved 3.73% to $2,384,351.
The declines in race days have helped keep further wagering growth in check. While handle has improved three straight years, none of that improvement has surpassed 2%. The positive strides are still well short of making up for the handle declines from 2006-2010 when handle fell by more than $4 billion from $14.785 billion to $10.77 billion.
The 2017 decline in race days, and total races—down 1.71% to 37,628—also are contributing to stagnant purses. In 2017, purses in the U.S. were down 0.37% to $1,079,739,805. It’s the fifth straight year that purses have declined. Those declines have been slight—never more than 1.6%—but they add up to a 4.26% decline since 2012.