Friday, Feburary 07, 2003
Copyright © Las Vegas Review-Journal

SHOULD THE GAMING TAX BE RAISED TO SOLVE NEVADA'S REVENUE CRISIS?

NO: Other businesses must shoulder the burden

Funding critical government services requires non-gaming companies to step forward

I'd like to respond to John L. Smith's Jan. 26 column in which he suggests that Nevada's gaming industry supports a tax proposal that places the tax burden entirely on Nevada citizens. Mr. Smith also suggests that gaming should pay more because other states, including California, tax gaming at higher rates.

Mr. Smith is dead wrong when he implies that gaming won't pay its fair share and is trying to skirt future taxes at the expense of Nevada residents. He also leaves out essential information when he compares gaming taxes in Nevada to those that are paid in other jurisdictions.

Nevada's gaming industry generates more than 50 percent of our state's general fund, which is used to operate state government and, more importantly, provide the critical services that all Nevada residents need and desire. The industry has shouldered this burden alone while others in the business community have not contributed, despite the fact that they have reaped incredible profits from our growing economy.

Over the past year and a half, the Governor's Task Force on Tax Policy developed tax proposals designed to broaden Nevada's tax base. The panel worked to reduce Nevada's reliance on a vacillating tourism-based economy. Nevada is experiencing a structural deficit caused by diminishing growth in state revenues and accelerated growth in state spending necessitated by Nevada's unprecedented population increase.

The gross receipts tax is the centerpiece of the task force's recommendations. The governor has also expressed his endorsement of this idea, and the gross receipts proposal is a key component of his budget. Nevada's casinos support the plan too.

The gross receipts tax would help stabilize the state's tax structure by requiring large businesses that currently pay virtually no state taxes to help fund state services. Furthermore, its impacts to small businesses and Nevada residents are the lowest of any proposal discussed to date by responsible individuals. Let me explain why.

The governor's plan calls for the first $450,000 in receipts to be exempted from taxation. This provision exempts 60 percent of Nevada's businesses from taxation. The rest, including gaming, would pay a tax equal to 0.25 percent of their annual receipts.

While taxes often get passed on to the end user in one form or another, larger companies will build the gross receipts tax into their regional pricing schedules resulting in minimal increases in Nevada. In other words, a department store like Macy's will take the .0025 gross receipts tax and build that added expense into its products sold throughout its stores nationwide.

That's why you see consistency in pricing throughout the nation from multi-jurisdictional companies. Right now, Nevadans are paying for the high corporate taxes paid by department stores, auto dealers, and furniture outlets in other states.

On the other hand, a sales tax on services -- which has been proposed by big non-gaming businesses--would be directly passed on to Nevada citizens. For instance, an accountant would simply add 7 percent -- or whatever the determined rate -- to his clients' bills. Nevadans would also pay an additional 7 percent for common services such as haircuts, dry-cleaning, after-school tutoring, day-care and more.

The gaming industry is ready to participate with the rest of the business community in paying the gross receipts tax, even though it would pay 25 times the gross receipts tax paid by non-gaming businesses. Members of the gaming industry would pay an additional 0.25 percent on gross gaming revenue and 0.25 percent gross receipts tax on all non-gaming revenue.

It should also be noted that gaming would also pay the largest portion of the other taxes proposed by the Governor, such as the Business Activity Tax (which is proposed at $300 per employee), alcohol and cigarette tax increases, and property taxes.

Mr. Smith is wrong to suggest that casino operators who have partnered with tribal gaming operations in California pay higher taxes there. California tribal gaming operations pay no state taxes and they pay a relatively small amount into a revenue sharing account in lieu of state taxes.

While it is true that tax rates on gaming operators are higher in other states, there is a valid reason for this. Most other states that allow casino gaming limit the number of gaming licenses that are issued. Casinos in these states pay a premium to operate in an area where there is limited competition. I can tell you that Station Casinos would be more than willing to pay higher taxes if, for example, it operated just one of three casinos in an area the population size of Las Vegas.

In Nevada, gaming licenses are unlimited provided that an operator meets certain criteria. There are hundreds of gaming operators in the state of Nevada and we remain competitive by investing hundreds of millions of dollars in capital in our properties, which has enabled us to remain the entertainment capital of the world.

On countless occasions, members of Nevada's gaming industry have expressed their willingness to support the governor's tax proposals despite the fact that we will shoulder a significant portion of the new tax increases. What we see as important, however, is that other members of our business community contribute their fair share through a broad based business tax that will provide stability for our state's long-term revenue needs.

So, Mr. Smith, if you want to point the finger at an industry that advocates tax proposals that place an increased tax burden on Nevada's citizens, I suggest that you direct your attention to the large corporations that are not willing to do their part and instead support the creation of a sales tax on services, which will reach into the pockets of our residents, families and workers.

Lorenzo J. Fertitta is president of Station Casinos and chairman of the Nevada Resort Association.