Proposed tax increase unfair to gaming industry
October 22, 2007
Soak the gamblers! That’s the battle cry of the Nevada State Education Association (NSEA) and others who want to sock it to the casino industry in the name of public education and “the children.” Not so fast, folks. Let’s take a closer look at the huge tax increase that you’re proposing.
Shortly after I started writing this weekly column in 1996, I proposed a modest increase in state gambling taxes and a few years later the Nevada Legislature boosted the tax rate on the largest casinos (those that gross more than $1 million per month) from 6.25 to 6.75 percent of gross winnings. At the time, I thought that 8 percent tax increase was just about right.
Now, the NSEA and its allies want to raise the top tax rate on large casinos from 6.75 to 9.75 percent – a whopping 44 percent increase rather than the 3 percent that they’re advertising in order to fool Nevada taxpayers. Do the math.
These “soak the gamblers” proposals have been floating around ever since the 1960s, when similar proposals were launched by perennial candidate Bill Gault and a Sparks minister, Rev. Clyde Matthews, among others. I worked for the state gaming control agencies then and we commissioned a casino profitability study by a national accounting firm to determine whether the gaming industry could withstand a huge tax increase. The answer was a resounding “No.”
Thirty years later former State Sen. Joe Neal, a North Las Vegas Democrat, teamed-up with the NSEA on a proposal to increase gambling taxes by more than 33 percent. To her credit Carson City Assemblywoman Bonnie Parnell, a former Teacher of the Year, voted against her fellow Democrat’s confiscatory tax proposition.
Let me ask you a simple question: How would you feel if the Legislature increased your property and/or sales taxes by 30 or 40 percent? Even though our casinos are an easy and very visible target, we should be careful about killing the goose that lays the golden eggs for our state treasury. Gambling and tourism account for at least half of our state’s general fund revenue, much of which goes to public education.
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Casino gambling is a very competitive business these days as virtually unregulated Indian casinos proliferate throughout California and the Pacific Northwest, where most of our Northern Nevada tourism comes from. Although I’m not an economist, simple logic tells me that a 44 percent gambling tax increase would cripple many casinos in our area and close more than a few of them. Think about it.
As a former gaming control official I believe that casinos should pay their fair share of state taxes, but I think it’s unfair to single out casinos while ignoring other sectors of our economy – for example, the home-building industry, mining, or “big box” retail stores, which should pay their fair shares of the additional expenses they generate in our communities. Those expenses include millions of additional dollars for police and fire protection, and public education.
Keep in mind that gambling taxes are levied on casinos’ gross winnings, the total amount of money wagered before winners are paid, which means that a 6.75 percent tax on gross winnings could well be equivalent to 20 or 30 percent on net profits. That’s why I think proponents of a huge tax increase should scale back their demands to a more reasonable 8 to 10 percent, which would boost the top casino tax rate from 6.75 to no more than 7.5 percent, which is reasonable.
Although statewide casino winnings have increased dramatically in recent years, due largely to new mega-casinos in Southern Nevada, Washoe County and Northern Nevada are hurting. Although winnings rose 14.1 percent on the Las Vegas Strip last July – at the height of the summer tourist season – they were down nearly 9 percent in Reno and more than 7 percent at Lake Tahoe.
My conclusion is that supporters of a huge gambling tax increase haven’t done their economic homework. “This is a tax on an industry that annually reports great profits,” said Washoe Education Association President Ken Buhrmann. Excuse me Ken, but casinos don’t report profits; they report gross winnings. Prof. Bill Eadington of UNR’s Gaming Studies Institute noted that a big casino tax increase “would have much more of a negative impact in the north because the properties are more marginal,” which is true. Just look around next time you’re in downtown Reno.
Therefore, I urge the “soak the gamblers” crowd to go back to the drawing board and come up with a gambling tax proposal that is fair to the casinos and other sectors of Nevada’s statewide economy.
• Guy W. Farmer of Carson City, served as press spokesman for Nevada’s gaming control agencies during the period 1963-66.
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