Saturday, September 20, 2008

Squeezing hard on a withering lemon

Having spent the week working with CNBC constantly in the background while the stock market careened from one extreme to the other and the government announced its intent to intervene in the credit crisis with a financial version of “Shock and Awe” the one-percent increase in the takeout at New York Racing Association racetracks with the exception of Finger Lakes, effective Wednesday, was met by less outrage than it deserves.

So, while the taxpayers are now unwilling, ad hoc shareholders in AIG and face the very real prospect of shouldering yet undetermined but inevitably staggering expense of a wholesale bailout of people whose greed, incompetence and sheer stupidity have brought free-market capitalism effectively to an end in this country, those who happen also to be payers of already onerous pari-mutuel taxes find themselves and their financial well being slammed from an entirely different direction.

This time, the state of New York – already renowned for the tax burdens imposed upon its citizens – is the culprit. This levy is intended to pay for its takeover of New York City OTB but will succeed only in providing another example of government of the oppressed by the incompetent and uninformed. In practice, it will accomplish exactly the opposite of what those who reside in the intellectual vacuum of the legislature intended, another bad idea supported tenaciously in the face of logic. Every attempt by those involved in various segments of the industry, which made a strong case for holding the line, was ignored with arrogance typical of those in power.

The takeout on sequential wagers and other propositions popular with bettors is now as high as 26 percent, a Draconian tariff that will eventually result in a decline in betting receipts, which are already substantially diminished from 2007 levels in a recessionary climate that gnaws at the fiscal health of most Americans.

Raising prices in a recessionary economy is not exactly an enlightened business strategy. The result is inevitable. One percent added to an already substantial off-the-top skim amounts to a stimulus that encourages the off-shore migration of funds that will no longer reach comingled pools and are rebated more generously that anywhere in the United States. Worse -- some bettors will turn to other pursuit, which, from a practical standpoint, is perfectly logical – unless they begin trading stocks.


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