Kentucky senator: State wants bigger slice of Derby pie with Churchill expansion

McGarvey said Kentucky loses millions in horse racing tax loophole
Kentucky loses millions due to a tax loophole for horse racing, McGarvey said.
Published: Sep. 30, 2021 at 11:20 PM EDT
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LOUISVILLE, Ky. (WAVE) - Churchill Downs Inc.’s Thursday announcement of a downtown Louisville Derby City Gaming facility could mean a lot of money being spent in the Bluegrass State.

The facility would hold 500 historical racing machines, which allow patrons to wager on video replays of actual horse races that already have been run. The machines, which were briefly deemed illegal by the Kentucky Supreme Court in 2020, are not slot machines as they use a different method of odds for winning.

Derby City Gaming, which opened in September 2018 on Poplar Level Road, has raked in the cash, with patrons depositing $3,261,586,596 as of the July 2021 Historical Racing Report. That total is close to $1.1 billion a year - roughly the same as The Kentucky Lottery. Churchill Downs pays 18% of that money into several tax funds, 8% to the state, and 10% to equine industry programs, including prize purses for the Derby itself.

Kentucky Senate Minority Floor Leader Morgan McGarvey (D-District 19) calls the tax plan a loophole where the state is missing out on millions.

“We’ve watched carloads of cash cross the river into other states,” McGarvey said. “Instead of allowing that money to stay here, now we’re building slot machines in downtown Louisville, but we’re not calling them slot machines and we’re not taxing them like slot machines.”

Caesars Southern Indiana Casino in Elizabeth, Indiana, pays taxes on a sliding scale, around 22%. In the same time Derby City Gaming was open, Indiana casinos generated nearly $15 billion in tax revenue. McGarvey said he’s happy about Churchill’s expansion, but said calling it a casino would benefit everyone.

“It’s clear that we already have gaming in Kentucky,” McGarvey said. “We need to make sure that we have the ability to have full casinos here, for the people that are coming in for the bourbon trail, for the conventions, for the revenue that it could generate for the state, that we could put toward education, infrastructure, and healthcare.”

Kentucky Center for Economic Policy director Jason Baily called historical horse racing a blatant attempt to keep money from the state coffers.

“It’s a scam of massive proportions,” Baily said. “We are a casino state, just through the back door.”

State representative Kim King pre-filed Bill Request 367, raising traditional horse racing tax, and the Pari-Mutuel Taxation Task Force is considering other measures.

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