Gamers’ patience taxed

Tax revenue shortfalls and dueling initiatives to raise the state gaming tax have Nevada's largest industry playing a prevent defense.

During the keynote address at Thursday's annual luncheon for the Nevada Development Authority, MGM Mirage Chairman and Chief Executive Officer Terry Lanni said competing calls for government budget reductions and tax increases must be answered with a broad-based levy on all businesses. He said the state's current economic hiccup is attributable to Nevada's tax structure, which depends primarily on sales and gaming receipts.

"We must fix the recurring chaos created by this flawed system ..." he said. "We must all face up to the reality of the needs of the state of Nevada in a new century and beyond. The time came long ago for the establishment of a business tax paid by every large business that benefits from operating in this state."

Three days earlier, Boyd Gaming Corp. President Keith Smith said nearly the same thing in a speech to industry executives at the Global Gaming Expo. He said it is patently unfair to make casinos alone pay significantly higher taxes to fund government services used by all Nevadans.

The game plan is identical to the one the gaming industry used in 2003, the last time tax revenue growth slowed and Nevada's political class supported tax increases.

The end result? A broad-based business levy wasn't part of the record tax increases signed into law, but a half-percentage-point increase in the gaming tax was. State spending skyrocketed. Those increased expenditures boosted the baseline budgets for all agencies, making them practically and politically difficult to cut. Which is exactly what Gov. Jim Gibbons wants to do in the face of sagging revenue growth -- not a revenue decline, mind you, but slower revenue growth that will still leave state budgets bigger than they were last year.

Because Gov. Gibbons was elected on a pledge to not increase taxes, various special interests are attempting to do so through the initiative process. On Monday, the Nevada State Education Association filed with the secretary of state its petition to increase the gaming tax 3 percentage points, from 6.75 to 9.75 percent. The union wants the new revenue to increase teacher pay and improve classroom resources. A second petition seeking a much bigger increase in the gaming tax could be filed by the end of the month.

Meanwhile, do gaming executives believe that if they defeat both initiatives and get their broad-based business tax passed by a supermajority of the Nevada Legislature, they will forever immunize themselves from targeted tax increases? Do they think a "reformed" Nevada tax structure will prevent future economic slowdowns and the kinds of revenue blips that leave governments demanding more money?

In fact, by taking the position that Nevada's taxes should be higher, they're ensuring a repeat of this cycle. Higher taxes mean increased government spending. And increased government spending inevitably leads to higher taxes.

Nevada governments have more than enough money for their operations -- state general fund spending has grown 70 percent over the past six years, to more than $3 billion per year. Nevada's tax structure has allowed public-sector budgets to grow quickly and predictably over the past decades.

Nevada doesn't need any new taxes, and the gamers would be wise to say as much.