Wednesday, February 26, 2003
Copyright © Las Vegas Review-Journal

Neal makes case for higher gaming tax

Senator tells taxation panel gambling's social problems cost state $450 million

CARSON CITY -- In calling for a significant tax increase on casinos, state Sen. Joe Neal said reliable studies show the gaming industry does not pay enough taxes to cover the social costs of gambling addiction and the service needs of its workers.

During a Senate Taxation Committee hearing, Neal referred to a University of Nevada, Las Vegas study that put the social costs of problem gambling in Clark County at $450 million a year. He also cited a 1999 state Economic Development Commission study that concluded the gaming industry is "a strain on resources," costing the state $4.3 million in additional services for each 8,000 workers.

Neal pointed to the studies as evidence that lawmakers should pass Senate Bill 21, which would increase the gross gaming tax from 6.25 percent to 10.25 percent.

The tax increase would boost state revenues by about $350 million a year and significantly diminish the need for tax increases proposed by Gov. Kenny Guinn. He wants about $1 billion in new taxes over the next two years to balance the state budget and fund new programs, but little of the new revenues would come from the gaming industry.

The North Las Vegas Democrat is the Legislature's most vocal critic of the gaming industry. He has tried to pass some version of the bill since 1999, and he made increased gaming taxes the cornerstone of his failed gubernatorial campaigns in 1998 and 2002. Consequently, his campaigns had no financial backing from casinos, and he has precious little support from his legislative colleagues.

Neal said the gaming industry has not been assessed a tax increase in 16 years and its current rate is the lowest gaming tax in the world.

"The gaming industry is not a benevolent industry," he said. "It takes more from us than it gives to us and they ain't nice guys."

He called it shameful for the gaming industry to lay off 15,000 workers after the Sept. 11, 2001, terrorist attacks. MGM Mirage alone laid off 6,000 employees, according to Neal, while paying its top executives $5.2 million in additional compensation.

He also charged the gaming industry "cooked the books" by citing costs it incurred in other states to show it lost $33 million in Nevada in the fiscal year that ended June 30.

Senate Taxation Chairman Mike McGinness, R-Fallon, did not take a vote on the bill after an occasionally heated two-hour hearing that featured debates between Neal and Nevada Resort Association representatives Bill Bible and Billy Vassiliadis.

After the meeting, McGinness said Neal's 4 percentage point tax increase would not pass, but the committee might approve a gaming tax increase higher than one Guinn recommended. He proposed raising the tax to 6.5 percent in 2005.

Greg Bortolin, Guinn's press secretary, sticks to the governor's proposal to increase the gaming tax by a quarter of one percent. "The governor has a proposal he believes in. It broadens our tax base. A major tax increase against any one industry would be counterproductive."

McGinness said his committee will look over competing tax increase proposals in the next few months before voting on Neal's bill. He said a gaming tax increase beyond the quarter percentage point recommended by the governor would not be unreasonable.

The Taxation Committee chairman said he thought the Economic Development Commission findings were "significant." He said that in previous legislative sessions Neal did not present evidence to back up his contention that the gaming industry should pay higher taxes.

During the hearing, Station Casinos President Lorenzo Fertitta said the Legislature no longer can look to the gaming industry for the bulk of its general fund tax revenue. He called for legislators to pass Guinn's proposed .25 percent gross receipts tax on all annual business revenues of more than $450,000. Fertitta said the tax would make major "retailers and car dealers finally pay something."

Bible challenged Neal's contention that gaming does not pay sufficient taxes to cover any social problems it causes. He noted that while Neal considers the 40 million tourists who come to Nevada every year temporary residents, "few register in the K-12 public school or university systems for one or two days, and that's where 50 percent of your expenditures go."

He also disputed Neal's contention that the gaming industry cheated to show it suffered losses in Nevada last year. Bible said he doubted the Gaming Control Board would allow casinos to charge costs incurred in other states against their Nevada earnings.

Before becoming president of the Nevada Resort Association, Bible was Gaming Control Board chairman. He also was state budget director.

In response to Neal's criticism, Fertitta defended his company's decision to manage an as yet unopened American Indian casino near Sacramento, Calif. He said the money Station Casinos earns managing the Indian casino will benefit the construction of a $300 million casino off the Las Vegas beltway.

"Times have changed," he said. "The gaming industry has never shirked its responsibilities. We are willing to pay our fair share."

A poll conducted for the Review-Journal earlier this month showed little support for Guinn's proposed tax increases and strong support for increasing the gaming tax.

On Guinn's tax increase proposal, 56 percent of registered voters surveyed opposed it, 30 percent supported it and 14 percent were undecided. But 67 percent favored increasing the state gaming tax, with only 26 percent against the idea and 7 percent undecided. The polls had a margin of error of 4 percentage points.