State Would Lose Under Legal Sports Betting, Critics Say : Gambling: Receipts would drop sharply because of low tax rate, they argue. An official analysis of the proposal agrees. Supporters predict a spot on ballot.


With their campaign to collect signatures apparently going well, proponents of legalized sports betting say there is a good chance that their initiative will qualify for next year’s primary election ballot.

Meanwhile, those against the proposal have opened up a new line of attack: taxes.

They contend that the initiative’s sponsor, Assemblyman Richard E. Floyd (D-Gardena), has set the taxes on proposed sports betting at so low a level that if the new betting opportunities were to entice patrons from the racetracks or the lottery, California’s coffers would lose money because tax receipts from gambling would drop sharply.


The taxes collected from sports bettors would be only 0.3% of gross receipts, compared with 5% for horse racing and 35% for the lottery, one expert said.

In an article written for The Thoroughbred, the magazine of the California Thoroughbred Breeders Assn., Myron F. Johnson, the association’s legislative chairman, calculates that from $2.9 billion wagered annually at the races, the state collects about $150 million in taxes, and of the $2.15 billion spent on the lottery, the state gets about $760 million.

If $3 billion were shifted from those categories and wagered on sports bets, the state would receive only $9 million in taxes annually, Johnson wrote.

He concluded that if the lottery and racetracks were to lose business to sports betting, the state would be a big loser.

One official analysis of the initiative agrees.

Atty. Gen. Dan Lungren’s office included that possibility in the measure’s official summary, prepared before the petitions to collect signatures began circulating in June.

“Even a minor substitution of sports wagers for lottery and horse racing wagers would lead to revenue losses in the millions of dollars,” the summary says.

Bill Mashburn, treasurer of Californians to Reform Gambling, the group formed by Floyd to advance his measure, said last week that the assemblyman does not believe patrons of the lottery or horse racing will abandon those interests in favor of generalized sports betting.

Sports bettors would be mostly those people who now go to Nevada, Mexico or Oregon to place such bets, or people who are betting illegally with bookies.

This would increase state revenues, Mashburn contended, even if the tax levels on the legal betting were low. Mashburn said Floyd set the tax rate low to encourage entrepreneurs to enter the business.

Johnson, the legislative chief for the breeders’ group, notes in his article that even if many new kinds of gambling were developed under the betting initiative, the state’s revenue gain would be relatively small, given the comparative tax rates.

When state legislative analyst Elizabeth G. Hill assessed the measure, she also pointed out that there could be sizable net revenue losses.

Floyd’s proposal has been assailed by leaders of the National Football League, the National Basketball Assn. and organized baseball on grounds that legalized sports betting in a populous state could easily compromise the integrity of their sports, diminishing public confidence and interest.

Mashburn and Kelly Kimball, whose firm is circulating the petitions professionally, said last week that the drive to put the proposal on next year’s primary ballot is going well. They expressed confidence that by the Nov. 4 deadline they would have more than the required 615,958 signatures from registered voters.

The major provisions of the initiative would:

* Scrap the present state lottery commission and horse racing board and group all facets of gambling--including sports wagering, horse racing and the lottery--under a new state gaming commission. Nevada-style casinos would not be permitted.

* Allow racetracks, card clubs or anyone with a clean record who was willing to post a $100,000 license fee to set up sports bookmaking operations in any California city that permits the wagering.

* Establish a monthly sweepstakes horse race as part of the California lottery.

* Prohibit owners, officials and players in professional and college sports from making bets.