Should Pennsylvania Subsidize Horse Racing?

Last month the House passed a General Fund budget that included more than $56 million in corporate welfare reductions. At the time, we indicated even more reductions were possible given the hundreds of millions of corporate giveaways outside the General Fund. One prominent example is $250 million for the Race Horse Development Fund.

Subsidies for horse racing account for almost one third of the more than $800 million spent on corporate welfare annually. Fortunately, lawmakers are considering scaling back this fund to avoid raising taxes for a second consecutive year.

They have plenty of good reasons. Much of the money ends up in other states, or countries, and the subsidies have failed to reinvigorate or even stymie horseracing's decline.

The Race Horse Development Fund primarily finances purses (prizes) for horse races. When the Tribune-Review reviewed the records of winning owners over a two-year period, they found a bulk of the prize money went to out-of-state owners, including at least $1 million to the multi-billionaire vice president of the United Arab Emirates.

A more recent Independent Fiscal Office report found more than 20 percent of all prize money was spent outside of Pennsylvania. Essentially, subsidies for the wealthy are flowing to other states while Pennsylvania-based businesses close their doors as a consequence of high taxes.

Subsidies for horse racing account for almost one third of the more than $800 million spent on corporate welfare annually.

Defenders of the fund claim the prize money is essential to helping the industry thrive, but a Pennsylvania Gaming Control Board (PGCB) report shows the industry continues to struggle. Attendance, gross terminal revenue, and taxable handle (wagers) are all down from 2015. This despite the nearly $250 million dedicated to propping up the industry.

With Pennsylvania's budget hole potentially surpassing $1 billion, lawmakers can't justify special treatment for one industry.

As Majority Leader Dave Reed recently put it, “a new approach to economic development needs to be considered in this state of removing some of those items to the table, just lowering tax rates and letting businesses and entrepreneurs compete to create jobs.” 

That new approach is needed right now.