Taxpayers Association, gamers at odds over taxes and subsidies

Monday, March 27, 2000 | 10:50 a.m.

A report to be issued this week challenges the Nevada gaming industry's key tax arguments. The report also defends the state's bid to diversify its economy and says the state's growth is paying for itself.

Using state funds to diversify the economy through subsidies is controversial because the gaming industry is complaining that it isn't subsidized and that it pays more than its share of taxes.

The gaming industry -- facing a movement to hike the gaming tax -- also says one reason growth isn't paying for itself is because nongaming businesses aren't paying their fair share of taxes.

But the new study, undertaken by the Nevada Taxpayers Association, downplays the role of taxes paid by the gaming industry to subsidize diversification. It says gaming tax collections per capita have declined in the past 10 years.

About 2,500 copies of the report are being printed today and will be distributed by the end of the week to the 800 statewide members of the Taxpayers Association and members of the Nevada Development Authority and the Economic Development Authority of Western Nevada.

Backers of the study say it is the first report to definitively explore the case for diversification, a practice advocated by several pro-development groups. Many of those advocates are asking the state government to allocate more tax dollars toward diversification efforts.

Carol Vilardo, president of the Nevada Taxpayers Association, said the 19 1/2-page report was commissioned by her organization and conducted by Hobbs, Ong & Associates and Applied Market Analysis, both of Las Vegas. The research was gathered over the past five months, she said.

Jeremy Aguero of Applied Market Analysis was the principal analyst on the project.

Highlights of the report's findings:

Aguero said researchers studied state economic statistics from over 30 years and reviewed the impact of large industries on their respective communities, like aircraft manufacturing on Washington, the automotive industry on Michigan, the oil industry on Texas and Oklahoma and the steel industry on Pennsylvania. They also reviewed how a tourism downturn on the island of Maui affected that Hawaiian island's real estate market.

Although gaming industry estimates place the number of employees directly employed by gaming, hotel and tourism companies at between 21 percent and 28 percent, Aguero said the number is actually closer to double that, since many restaurants and retail outlets are directly tied to gaming concerns.

A healthy ratio of a state's dominant industry to other businesses, he said, is about 1 in 5, or 20 percent.

"Placing all of our 'economic eggs' into a single basket is clearly a dangerous proposition," the report's conclusion says. "Gaming and tourism have been very good for Nevada, but it would be a utopian fantasy to believe that the phenomenal growth it experienced during the last 12 years will be repeated in the next 12 years.

"Selective economic diversification is a sound public policy that should not be treated lightly because the economy is prosperous. There is every reason to be optimistic that Nevada's economy will continue to grow.

"However, prudence and realism demand that we take notice of the communities that have risen and fallen during the 20th century, learning from both their successes and failures. If we do not, we are betting that our economy is so unique that the rules of economics do not apply to Nevada. In this proposition, the odds are against us."

A spokesman for the gaming industry disputes the report's findings and says casinos still pay a disproportionately high amount in taxes to support all government activities, including economic diversification.

"How they are making the assertion that growth pays for growth is a leap of faith," said Billy Vassiliadis of R&R Partners, a lobbyist for the gaming industry. "If that were true, we would not have park issues, we would not have transportation issues, we would not have school issues and we would not have polluted air.

"What growth has done has provided a cash flow for government to run on," he said.

A report was prepared by Arthur Andersen and UNLV's Center for Business and Economic Research on behalf of the gaming industry's Nevada Resort Association earlier this month.

"Nevada's tax structure is uniquely dependent on gaming revenue to finance government while it exempts other businesses from bearing a commensurate portion of the tax burden," says a summary of that report.

"The current tax structure requires the gaming industry and its employees to pay more than their fair share of state taxes," the report says. "While new, nongaming businesses are diversifying Nevada's economy, they fall far short of commensurately expanding its tax base."