Much has already been written about horse racing and the "double taxation" practiced by our state and Federal governments. Andy Byer and Steve Christ, two of the most notable names in horse handicapping, seem to write about the subject on a regular basis. First some details, then some comments.
As most of you might or might not know, any sizeable winning bet is taxed twice by the authorities. First, a rather large % is taken out of the betting pool (win/place/show/exacta/trifecta/superfecta/pick 3,4,5/etc.) The percentages vary by type of bet and the state. Win, place, show bets typically have the least taken out while multi race bets like doubles and Pick 3,4,6's have the highest % taken out. On the low end it's typically around 16-18% while up to 26% on the multi race bets. Some of this money goes to race purses and track operations while the rest goes towards taxes. So, before the race even finishes, a substantial amount of the betting pool has been removed.
Now the race is run and you have a long-shot and you're looking at a big payoff. Not so fast bucky............
The federal government is waiting for you when you go to cash your ticket. If your winnings minus your wager are over $5000 and at least 300-1 times that wager, 28% of your profit will be withheld immediately. Plus, you'll be handed a Form W2-G for good measure. You'll just get the W2-G if it's 300-1 and $600 winnings.
Of course you are expected to declare ALL winnings to the taxman at the end of the year and offset them against your loses as an itemized deduction. If you don't itemimize, tough luck. Most people, if not all people, do not declare there week to week winnings of smaller amounts. The IRS does not seem to care about those.
So, here's my point. HOW THE HELL ARE YOU SUPPOSED TO MAKE A PROFIT???