Friday, February 28, 2014

Race Track Subsidies

The WV House recently passed a bill to reduce subsidies to thoroughbred and dog race tracks. It estimates this would save the state $35 million and help reduce a budget deficit. Some delegates objected because they represent districts with dog breeders or race tracks. Do they have a point, or are subsidies to private enterprises like these an unnecessary expense to the state?
Tyler Cowen of George Mason University calls state "racino" legislation that allocates a percentage of gaming revenue to racing and breeding businesses a "triply stupid policy". Why such a harsh endorsement? The first trip up, in his opinion, is that there should not be a separate legal entity for a casino with racetracks, such as Mardi Gras Resort and Casino in Cross Lanes, WV. Secondly, he objects to the nature of such legislation as a response to competition between state lotteries and racinos. State lotteries like to bill themselves as great benefactors to local education. But the effects of all their spending on education is ambiguous while the revenue they generate is often extracted from the lower income residents of a state. And lastly, Cowen finds it bizarre that a private, for-profit enterprise should need state funding to survive. In his words, "how about spending the money on poor people, rather than on sectors which extract money from a disproportionately lower income clientele?"
Delegates arguing against this legislation are doing so to represent their breeders and race track workers. That is all well and good. But what is the cost-benefit of defending these subsidies? It seems fairly intuitive that if a company cannot operate without government subsidies perhaps it should not be in business. And if race tracks are losing out to competition from state lotteries, why not abolish the state lottery? Again, state lotteries extract revenue from lower income residents, on average, and frame their operations as benevolent by funding things like education. These lotteries could be replaced by so called "no-lose" lotteries run by local credit unions. Some states, like Michigan, already allow these "no-lose" lotteries where savings accounts are opened by players and the winners receive extra cash in lieu of each depositor gaining interest in their account. Britain already runs a form of this that they call "premium bonds". That program has been around since 1956.

So while we are reviewing race track subsidies, maybe it's time to throw in some lottery reform as well. It's food for thought. 

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