Miracles do occur—people in the Kentucky horse racing industry and their major nemesis have found common ground.
A recent headline on Kentucky.com read: “In 2011 Governor’s Race, Candidates Offer Different Routes to More Jobs.” One of the three candidates is state Senate President David Williams. He, more than any other person, is the bête noire for Kentucky horse racing interests.
Kentucky has a 10 percent unemployment rate and state government under the incumbent governor, Steve Beshear, has cut programs and furloughed employees. Beshear, a Democrat, is currently the favorite for reelection in spite of his state’s stagnant economy and above-the-national-average unemployment rate. His opponent will be either Williams or Louisville businessman Phil Moffett, who are Republicans.
Senator Williams has been a persistent opponent of the racing industry in Kentucky, bottling up legislation that would permit racetracks to install video lottery terminals by statute or legislation that would allow the voters to decide whether to alter the state constitution to allow for expanded gaming. The irony is that many and probably the vast majority of the prominent American racehorse farm owners in Kentucky are free enterprise advocates who are strong supporters of market-oriented economic precepts and Republicans. Williams’ “I know what is best for you” nanny approach is far removed from the consumer-sovereignty tenet of Republicanism.
The Kentucky.com article explained that the trio of gubernatorial candidates differ on how to get the state’s economy moving: “Williams says Beshear’s economic development model is ‘broken,’ based on an antiquated tax system and an anti-growth culture in state government.” Further, “Williams thinks the tax system should tilt toward a consumption model” or, in other words, the Commonwealth should tax people more on what they spend.
According to a Kentucky government website, “The Sales Tax is imposed on the gross receipts derived from both retail sales of tangible personal property and sales of certain services to the final customer in Kentucky.” Evidently, the expansion of the Kentucky sales tax to include additional services is what Senator Williams has in mind–or an increase in the sales tax rate, or both.
If accompanied by investment tax incentives, a consumption tax is a commendable idea in that it fosters savings and capital formation, stimulates new businesses and products, and promotes job creation.
Most folks in the Kentucky horse racing enterprise would undoubtedly wholeheartedly agree with Senator Williams when he says that the Commonwealth has “an anti-growth culture in state government.” How well they know. Senator Williams has been and remains the point man for antigrowth, at least as it pertains to horse racing commerce. Yet the Senator has before him a method for initiating his consumption-tax policy and at the same time becoming pro-growth toward his state’s flagship industry and most important tourist attraction. In the parlance of negotiation, this is a “win-win” for Senator Williams and the Kentucky horse racing industry.
The installation of video lottery terminals at Kentucky racetracks would coincide precisely with Senator Williams’ stated public policy preference for taxing people on what they spend, especially for hedonistic non-essential consumption. An individual playing a slot machine is engaging in exactly such consumption. What’s more, Kentucky’s tax rate on video lottery terminal revenues would be much higher than the state’s existing 6% sales tax rate. A whole lot more money would pour into government coffers from taxing slot machine play at 35% to 40% or more than it would from taxing expenditures for such services as haircuts and palm readings at 6%.
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