Raggio cool to initiative to increase gaming tax

Senate Majority Leader Bill Raggio thinks that if anybody ought to be raising taxes and increasing education spending, it should be the Legislature, not a ballot initiative like what the teachers union is proposing.

"I don't support tax increases through the initiative process," Raggio, R-Reno, said. Targeting a single tax source for a single spending purpose is not a responsible approach, he said.

The Nevada State Education Association hopes to ask voters to increase the tax on big casinos by 3 percentage points, thus bypassing the Legislature and going straight to the people for funding that would be designated for education purposes.

But what are the chances the proposal ends up in the Legislature in 2009 anyway?

Neither the teachers nor the gaming companies are saying yet whether they'd consider making a deal. But there are plenty of examples of the gaming industry, targeted with a tax hit, brokering a compromise that softens the blow and shares the pain.

"If you look at their historical record, they'll probably try to find a compromise where they bring other people in," an industry insider said.

An analogous situation occurred earlier this year. A proposal by Gov. Jim Gibbons would have taken a portion of the hotel room tax money that currently goes to the Las Vegas Convention and Visitors Authority and used it for transportation projects instead.

The authority, a panel of industry heavyweights and elected officials, first loudly complained that the proposal was unfair and would have dire consequences. Then it helped work out a deal: $20 million per year in room tax money diverted, with revenue also coming from local governments and rental car taxes to bond a $1 billion funding package.

The gaming companies "have two ways to look at this," said a Republican political operative. "They can look for a middle ground," agreeing to a lesser tax increase as long as other industries also bear some of the burden, or "they can come out and say we don't think there needs to be a tax increase, period."

The latter approach would be a bruising public-relations fight to defeat the initiative. The teachers have said they believe the public will go for the idea of taxing an industry that reaps its profits largely from out-of-towners in order to shore up the school system.

The gaming companies argue they already contribute a disproportionate amount of the state's revenues and that they shouldn't be the only industry to pay.

This is a debate that Nevada has had for decades, state archivist Guy Rocha said.

"The casino industry always says, 'Why do you always keep coming back to us?'" he said. "On one side, the question is, are they really paying their fair share? The other side is, is it fair that everybody's always looking to them to save us?"

The first statewide gaming tax was implemented in 1945 at one-fourth of one percent. Since then, it has crept up in fits and starts to its current 6.75 percent, with increases usually precipitated by fiscal crisis and imposed only after a pitched battle.

The last increase was in the chaotic 2003 legislative session, when the gamers took a half-percentage point hit in conjunction with a hodgepodge of tax hikes on other industries.

Prior to that, the last increase was in 1987, when then-Sen. Don Mello, D-Sparks, threatened to bring a ballot initiative to voters seeking to raise the tax from 5.75 percent to 8 percent. The gaming industry headed him off at the pass by agreeing instead to a half-point increase -- once again brokering compromise to avoid confrontation.

In this case, however, it might not be possible for the gaming industry to agree to a deal to tax itself, because the Legislature and especially the governor might not approve such a proposal.

Gibbons, facing re-election in 2010, won't want to waver from his campaign pledge not to increase taxes. Even if legislators could pass a tax increase, they'd have to contend with a potential veto.

Raggio said it would be up to the Legislature to look at both taxes and spending in a comprehensive manner.

"Over the years that I've been in the Legislature, we've been very careful about raising taxes. We've done it only a few times, when it's been absolutely necessary," he said. "You don't do it by zeroing in on the one tax you think is least defensible, and you don't do it without being mindful of all the other needs" in the budget.

Senate Minority Leader Dina Titus, D-Las Vegas, said she would not take a position on the ballot initiative until she's had time to study its details. Titus, a university professor, has always had a strong ally in the teachers union.

Titus said the state should spend more money on education. "There's no question about that," she said. "I've always said that."

But as to whether raising the gaming tax was the answer, she said, "I'm going to withhold judgment until I get a chance to see what all the implications are."

Rocha said lawmakers would be hesitant to go against the wishes of the casinos.

"Anytime you take on the gaming industry, they bring out the big guns," he said. "You'd better look at what you've got on the line. They play hardball."

Contact reporter Molly Ball at mball@reviewjournal.com or (702) 387-2919.