New York's ADW Tax Screws Joe From Brooklyn

It was reported yesterday an out of state 5% betting tax was passed in New York state. The tax, which on a signal fee of say, 10%, equates to a 33% increase, will only affect New York bettors.

This is short-sighted, and something all-too-familiar in racing: The people in charge have no clue how we bettors operate.

Joe is from Brooklyn. Years ago he played at the OTB and churned about $10,000 a year betting the ponies. He, like most of us, was constantly broke and horse racing was simply a hobby. Then one day Joe discovered ADW wagering. He signed up with a place that offered him back cash rebates for his play - just like Vegas gave to Ernie Dahlman that made him move out of state in the 1990's. With a signal fee of 10% to pay the track and horsemen, and rake of 21%, the ADW kept three points for themselves for operating expenses, with the other 8 points going back to Joe from Brooklyn.

Joe then noticed a funny thing happened. He was betting his usual $100 a day, but at the end of the month, instead of being broke, he still had his original bankroll. He kept playing, and found out that over time he could bet more each day, and instead of playing three times a week, he was playing five. Joe became what racing wants and what he wanted for a long, long time: An every day player. Rolling over that rebate, Joe was betting more and contributing more for purses than he ever had in his lifetime. Racing was enjoyable.

Now, with a 5% tax on his bets, his takeout reduction dries up. The ADW - working on razor thin margins already - has passed the tax on to him. Joe figures it's no big deal and he continues to play. But a not-so-funny thing happens, at the end of the month he's broke again. He's back to where he started.

Joe gives it awhile but being back to where he was is a step backwards. He still likes racing, he still wants to watch the Kings Bishop or the Travers. He just doesn't really care to bet on it.

At that point Joe's tenuous relationship with racing has reached a tipping point. Joe has two choices: Try and find someone in another state to sign up to an ADW for him and play that way, or leave racing and move on to something else.

Joe is not "greedy". Joe did not get a bad call from the Saratoga stewards and he's pissed off. Andy Serling did not yell at him on twitter, nor was he shortchanged by a teller, or was served a bad hot dog from a surly Aqueduct waiter. Joe is just doing something we all do as a consumer: He is exhibiting perfectly rational economic behavior. The pizza place down the block he used to enjoy made it harder for him to enjoy it, so he switches pizza places, doesn't eat pizza as much, or orders Chinese food twice a month instead. It's really as simple as that.

Someone in racing might read this and say "give me a break". If they are saying that, they do not understand betting customers. This is as right as rain and perfectly accurate. You just have to be a real customer who tries to bet this sport each day to know so.

What's most maddening about New York's short-sightedness and lack of understanding of customers, is that the state is a slots state. Bettors have been asking for years that when slots are passed some of it is passed on to them so they can enjoy the game more. New York is not passing it on to them, they're doing the exact opposite. For many players they are raising their prices.

In Ontario recently the transition panel mentioned the horseplayer 29 times in its preliminary report. The government chastised the business for not taking care of customers with billions in slot revenue. You'd think New York would take heed. Instead they chose to screw Joe from Brooklyn and the thousands like him.

I guess it's what we expect and why so many of us are flabbergasted at the sport. Handle in 2014, if it just grew at the rate of inflation since the year 2000, would be around $20 billion.  It will probably be half that. People have been communicating their distrust and dissatisfaction for a long time. We just see far too much of the above; seemingly over and over and over again.