Gibbons’ tax stand criticized

MGM Mirage Chairman and CEO Terry Lanni believes Gov. Jim Gibbons should withdraw his campaign pledge not to raise taxes during his term in office and support a broad-based plan to fund state government.

Lanni, whose casino company operates 10 resorts on the Strip and is building the massive $7.8 billion CityCenter development, made his comments as the state’s casino industry is facing two potential ballot initiatives to raise the gross gaming tax above the current 6.75 percent.

Las Vegas attorney Kermitt Waters wants the gaming tax to match what casinos are taxed in other states, while the Nevada State Education Association is seeking to increase the tax rate on the state’s largest casinos to 9.75 percent.

Lanni, in an interview after MGM Mirage’s third-quarter earnings release, said casino companies have an unjust target on their backs.

“Any economist will tell you that it’s bad government to rely on one industry,” Lanni said. “My view is simple; all businesses that we have here — bankers, retailers, auto dealers — have to participate. Whether we’re ranked 47th in education, 48th or 49th, whatever the number is, that’s not a good rate and something needs to be done about it.”

Lanni said the governor and Nevada lawmakers need to find additional sources for revenue, rather than allowing special interest groups to pass tax increases through initiatives. Gibbons, he said, needs to take a leadership role in moving the state toward a more stable tax structure.

“That’s what governors do,” Lanni said.

Gibbons, a Republican, campaigned in 2006 on a promise that he would not raise taxes. Lanni said the governor should abandon his campaign vow and look at other means to fund government services in light of Nevada’s potential budget crisis, such as a broad-based tax that covers multiple industries.

“I think the governor should withdraw that position because that’s not necessarily sound government policy,” Lanni said. “It’s just not sound fiscal policy to tax one industry and put all your eggs in one basket. You’re banking our education system on the health of one industry and if there is a downturn, you have serious problems.”

Lanni’s criticism of Gibbons was somewhat surprising because of his support for the governor in the 2006 election. Lanni, a Republican, has supported Republican candidates financially on a national scale.

MGM Mirage and its corporate entities contributed more than $100,000 to Gibbons’ campaign. Perhaps equally important, Lanni encouraged others to give.

Twice, he hosted fund-raisers at the lavish MGM Grand Mansion for Gibbons, including one in the final days of the campaign featuring former New York Mayor Rudy Giuliani that raised as much as $100,000 at a time Gibbons’ campaign was struggling to fend off multiple scandals.

Lanni said he hadn’t spoken directly to the governor but figures his message will be received.

Other gaming executives supported Lanni’s position.

Boyd Gaming Corp. President Keith Smith, whose company is spending $4.8 billion on the Echelon development, agreed other industries should be part of any tax solution. Taxing by initiative, Smith said, is not a good way to run the state.

“Standing behind the no-new tax pledge, with the needs the state is facing today, is not a good way to solve any problems,” Smith said. “The governor needs to provide leadership and not allow just one industry to be looked at. We need to get other people around the table.”

International Game Technology Chairman and CEO TJ Matthews also opposes the initiative process.

While IGT, the industry’s largest slot machine maker, does not operate casinos, the company would suffer if casinos cut are forced to cut back on purchasing new gaming equipment.

“We have sympathy that there are needs in this state,” Matthews said. “We would support Terry Lanni’s view that there needs to be a broad-based approach. That makes much more sense than penalizing one industry.”

Gibbons’ press secretary, Melissa Subbotin, said Friday the governor continues to stand firm against any tax increase.

“It would be irresponsible in a time of an economic downturn to dip into the pockets of Nevada taxpayers,” Subbotin said.

Last month, in response to projected revenue shortfalls, Gibbons announced that selected state agencies, including higher education, needed to prepare priority lists on how they would cut their budgets by 5 percent, or a combined $184 million. Gibbons exempted public education, the prison system and public safety agencies, such as the Nevada Highway Patrol, from any cuts. On Wednesday, key government leaders are expected to travel to Carson City for a meeting to discuss the budget and economic factors impacting the state.

Two weeks ago, Senate Majority Leader Bill Raggio said the governor should not immediately make budget cuts and should wait for the Legislature’s consent before reducing state government agency budgets.

“People such as Sen. Raggio are speaking out because they understand we need to have proper balance in the state,” Lanni said.

A state report released in October showed that taxable sales declined 5.7 percent in August compared with August 2006. Gaming and sales tax revenues for the first two months of the fiscal year that began in July were off nearly $35 million from what was projected when the state’s two-year budget was approved in June.

The two taxes made up 60 percent of the revenue going into the state’s $6.8 billion budget.

Lanni said raising casino taxes would send the wrong message to Wall Street and could curtail investment. He said the stable gaming tax has been a reason MGM Mirage has been able to attract joint venture partners to Nevada.

At CityCenter, the investment of the Persian Gulf state of Dubai has invested $2.7 billion to acquire half of the project. Kerzner international Holdings, which owns the Atlantis Paradise Island resort in the Bahamas, is investing with MGM Mirage and Dubai World in a development on the Strip’s northern end.

“That investment could go somewhere else, which would hurt all of us,” Lanni said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.

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