While this is an oversimplification, I think the following analogy has some value.

Think of the takeout as a tax and the horseplayers as the citizens paying the tax and the tracks as States that Tax the citizens and the horseman (and others in racing) as private parties that do business with the state.

I think it is safe to say that right now most horseplayers (citizens) feel like they pay too much in taxes (the takeout is too high). Of course horseplayers (and citizens in general) would probably complain even if the rates were lower so that is not the real problem. The real problem is that horseplayers are now frustrated enough to start doing something about it. They are looking for creative ways to reduce the effective takeout (looking for tax loopholes or tax shelters) and, in fact, an entire cottage industry is growing up to support this new market (e.g. rebate shops).

Does any of this sound familiar? Have you ever seen a similar scenario outside racing?

Asfufh asked a legitimate question and I think his assumption is that what we have in racing is basically a "zero sum game." There are a bunch of die-hard horseplayers who are going to continue to play the game regardless of the rules or the takeout and that there is little or no chance of attracting new players. Under this scenario, to increase revenue, the tracks (States) simply need to maintain control and raise the rates. The die-hards will complain but they will continue to pay more. To lower the takeout makes no sense at all. It would simply lower revenue. This assumption that higher rates lead to higher tax revenue and lower rates lead to lower revenue was pretty well accepted in US policy until the early 80's.

TGJB also raises some good points but I think he is coming from a different set of assumptions. He is not convinced that there are as many die-hard horseplayers and that many of today's regulars (big players in particular) will opt for other gambling options that have lower effective tax rates such as sports betting, casino betting etc. or that they will opt out of the gambling game completely or will try to avoid the taxes either legally or illegally in various creative and ever-changing ways (e.g., off-shore rebate shops, etc.). I think he is also coming from an assumption that a lower effective tax rate may entice in new players because it would increase the perception that they actually have a chance to make a positive ROI or at least come closer to breaking even. This set of assumptions can lead to the optimistic conclusion that lower taxes will provide incentive for more people to play the game and for those playing to be less likely to avoid taxes and more likely to "play more." In other words, that you can have a "win, win" resulting in lowering taxes (makes the horseplayers happy) while raising revenue (makes the tracks happy) and even raise enough to share with others (and make the horsemen happy).

Of course, where economic theory and politics collide is in that last point regarding how the revenue is shared and what is "fair" or "equitable." Another complicating factor and the place where the analogy really tends to break down is that there is no strong federal government that can set a single rate and force the States to get along with one another and work together for the good of the industry, which makes progress slow and makes things messy for the horsemen and the horseplayers.

I don't pretend to have all the answers but I do think that the takeouts are too high (they are not competitive with other forms of gambling and entertainment) and I don't think it is a zero sum game. I also believe that if rates stay too high, that you cannot control the behavior of the horseplayers no matter how hard you try. People will either vote with their feet or continue to find even more creative ways to avoid paying taxes as long as they are perceived to be too high.

The long term answer has to involve some form of lower effective takeout that is passed on to horseplayers (via rebates or simply lower takeout or some combination of the two) with the rest of the take being equitably shared among tracks, horseman and the middle-men that help get the product to market (e.g., account wagering firms) so that all can continue to be successful in a sustainable way.

The bottom line is that the horseplayer is the "customer" and that the entire industry has to understand that and start treating the horseplayer like a customer. They have to understand what the customer wants and values and deliver that to them as effectively and efficiently as possible.

Instead, today the industry treats the horseplayer as a necessary evil. The product is overpriced (takeout is too high and not uniform). Product quality and reliability is suspect (small fields, drug use, computer race fixing, late odds drops, etc.). Product delivery is complicated and confusing (no one place where you can go to watch and wager on all tracks). I could continue the list but I will stop there.

In other words, the industry has done just about everything it could to destroy itself but has somehow survived. Why? Because Racing is a great game. If only we could say the same for the racing industry.

Chris