Every time the horses ran around the track in the U.S. last year the states collected $6,030.47. Since there were 35,210 Thoroughbred races, somebody obviously paid the states a good deal of money. That somebody was the racegoers, and they paid a total of $212,332,856. This year, being racegoers, they most assuredly will pay still more. Each year for decades now the racegoers have been paying more to bet on the horses, and if it were not for their pertinacity, courage, blindness, addiction or folly the sport would have been strangled long ago by the nightmarish complexities of racetrack taxation.
Today the total takeout is one-sixth of what is bet on every race, and if racegoers were economists—they aren't—they would become aware of the most discouraging tax perspective faced by any investors. Broadly speaking, the frequent bettor may in fact be paying a sales tax of 100%. It is like buying a car and then giving the car to the state.
The total take from pari-mutuel betting runs from 12% to a widely standard 15% in New York, Florida, Louisiana, Arkansas and elsewhere. To the take is usually added breakage to the dime. This means that the fractions determined by the odds which are under 10� are added to the take. Breakage to the dime adds a little less than 2% to the take—between 1�% and 1�%. Thus the official take in Maryland is 13% (increased last year from 12%) but, with breakage, it is really about 15%. The 15% take in New York and Florida comes to about 17% with breakage. Over the country as a whole the total take can be safely estimated at about 16%.
As simple barter this may not seem too bad. One-sixth of the total is taken by the "house," and the bettor is left with five-sixths. But there is a peculiar factor involved in the take at the racetrack. Taxes in general are not paid in kind: a man buying an automobile does not pay the sales tax on it by turning over to the tax collector a part of an automobile, but rather pays in money the tax that has been levied. The take at the track, however, is money paid out of a money pool. Suppose a sales tax were paid on a similar basis. You buy a bag of beans; you throw a handful in the tax barrel. This could be done—it has been done—but the tax collector is soon warned that there is a limit to how many of the customer's beans he can take. One hundred per cent is the last limit. The buyer of an automobile may be willing to pay a tax of several times the value of the car in money—this, too, has been done, in South American countries—if his only alternative is to do without. But if he must put back in the barrel the very car he buys, he is not likely to go car shopping.
What is really being taxed at the racetrack—what the taxpayer buys that makes him willing to subject himself to the tax rather than not play the races—is not so clear. But, centrally, it is the gamble itself, the hope of winning. The totalizer that adds up all the money paid by the race players at the sellers' windows and computes the totals on which the take is paid cannot take more than all that is put in at the sellers' windows; it may, however, be shaving off more than what the buyer supposes himself to be buying. Is the amount of money put in at the mutuel window also the amount being bought? It may be considered so, except for the 16% take, which in itself may not seem excessive: one-sixth of the bettor's beans go back in the barrel, and he is left with five-sixths. But nothing is clearer than that the race player does not get beans every time he buys. Normally, he goes to the sellers' windows four times to buy his tickets for every time that he goes to the cashiers' windows to collect his winnings. It may be said that he pays the cut only when he wins, and that he pays it out of winnings. True, but he puts up his money the other times. Whether he winds up with any beans to take home will depend on whether he can win often enough, or steeply enough, to be able to take only five-sixths of the beans he has paid for—84 cents on the dollar—when he does get anything back.
At the track this means that he must be 16% luckier than the average to break even. And thus, while on any one race he wins from the other winners (who get that much less than they would have got if he had not joined them), in the upshot the whole group of winners wins from the whole group of losers.
That is gambling, and it is fair enough. Our problem is the 16% that the losers lose and the winners do not win. More accurately, it is the 16% that is distributed over the increased losses of the losers and the decreased winnings of the winners. The take is not precisely 16% of the amount that the players have with them when they go to the tracks. It is a function of the play. Some few keep most of their money in their pockets, because they have so much or hazard so little. Some keep it there because they hit early and play all through "on their money." Some dutifully proceed to lose what they have without a break. But more bet some of their money, or much of it, over and over. So the amount the tote subtracts from the money a player sends into it is normally more than the percentage cut of the amount which that player had in his pocket to start with. Sometimes the amount that the tote subtracts will be more than all the money he brought with him to the track. Can he be said to have lost more than he had? That may depend on a decision as to meanings; at any rate, he has lost, out of the amount he would have had if there had not been any cut, a sum greater than the sum he brought into the enterprise.
As long as the cut does not reach 100% of the pool, it is true, the bettor can hope to win something on some one bet. He can hope to win on two or three in a period. But the hope grows geometrically dimmer and less excusable after the cut overwhelms one's rational hope of being better than the game. And, of course, it will be said that any cut, no matter how small, makes it irrational to hope to break even for long. I think this is not so. It would mathematically be so in a purely mechanical and accurate game—say, honest roulette. But in any case a man who likes to gamble is willing to take a little the worst of it in order to bet. The best gambling houses take from the roulette table the Monte Carlo cut, or one part in 37. Consider: you can bet $1 on each of 185 spins of the seductive wheel and, at a perfectly even break, pay only $5 for the privilege. And you may win handsomely. But if you played roulette with the same cut that the states enforce at our tracks, the same run of the wheel would cost you from $26 to $31. Walking up to such a wheel would make one feel as abashed as walking up to a one-armed bandit that you know may be taking anywhere from one to two parts in three. And this is how I sometimes feel now in walking up to a mutuel window. To some this is all to the good. Some favor an increase in the take because they want the tax to discourage, inhibit, penalize betting. And a high take does inhibit—though with surprising slowness. Some players assuredly go broke, many often. It has seemed strange to me that, profitable as any state makes it for itself whenever it raises the mutuel cut, it makes it far more profitable for all the illegal realm of bookmakers. For the take is paid in one way or another by every bettor, at the track or away from it, insofar as the track payoff governs, as it does almost universally. The bettors away from the track may pay more by getting less (as with a 20-to-1 limit, for example), but they pay the full house take to their bookmakers. The opponent of the races who advocates a high take and who bases his opposition on the array of tattered wives and starving children (or neglected husbands) seems to be trusting overmuch to the prudential calculation of the gambler. Or he may be saying that it is well if the gambler goes broke more quickly—maybe he will get a job.
But the opponent of racing who wants a higher take in order to discourage racing is only one of many working to increase the take. Insofar as he succeeds he clearly works against the majority, for what they want is revenue—more and longer meetings, more racing days, more races on each card, more betting, as well as a higher cut. In this the legislator who wants revenue for the state is joined by the tracks, with their need to pay for the game they present, their wish to do so competently and therefore luxuriously and their desire for profits—though there are some nonprofit tracks, like Keeneland in Lexington, Ky. and Delaware Park. In their intention to get revenue, the legislators are also spurred by an increasingly potent group, the horsemen, who want income from mutuel play through the track's increased purses. Last year the Maryland bill increasing the take to 13% allocated 5% to the state and 7�% to the tracks, with 4% of this allocated for purses and one-half of 1% allocated to Maryland-bred Fund races. As a rule, however, the larger part of the increased take has gone to state revenue.
Racegoers may well be the most put-upon and the least represented of groups. Last winter a good race writer, discussing a proposal for the conduct of racing and an increased take, said that "for once all parties concerned" were in favor. He listed the parties, and nowhere was there a mention of the most numerous—and financially most indispensable—party: those whose dollars keep the totalizer flickering. The Jockey Club and tracks, stockholders, management, state commissions and their association, officials, horse owners and trainers, riders, jockeys' agents, veterinarians, farriers, mutuel clerks, stable help, concessionaires, cooks, waiters, janitors, charwomen—all these sometimes speak and sometimes act in their own interest. But not the vast, miscellaneous, disorganized racegoers—33,073,712 last year—on whose patronage the well-being of the others depends.