Brochure touts broad-based business tax

Wednesday, Aug. 7, 2002 | 10:55 a.m.

The chief lobbying group for Nevada casinos -- the state's largest taxpayers -- has unveiled its latest tool in an escalating public relations debate about the need to raise taxes.

The Nevada Resort Association has distributed hundreds of copies of a brochure entitled "The Facts About Gaming" to politicians, business leaders and the general public.

The brochure, timed to coincide with the work of a state task force charged with helping to solve the state's tax problems, marks a savvy presentation of the group's position, observers say. Still, tax watchers say it's short on revelations and likely won't sway a public majority that believes the state's dominant industry -- now paying the lowest state gaming taxes in the nation -- should put up more to fund the needs of a booming population.

"I'm not terribly surprised by it," said Guy Hobbs, a public finance consultant and former finance director for Clark County who also chairs the Nevada Task Force on Tax Policy. "It's in line with testimony we hear from the industry."

"It's obviously showing the gaming industry in a positive light. But all of us are going to do that," said Carole Vilardo, president of the nonprofit and nonpartisan Nevada Taxpayers Association.

Some of the expected "positives" include letters from community groups that have received donations from casinos and testimonials from casino workers who say their jobs have improved their lives.

The brochure goes on to say the state "must not seek any new single-source taxes" and the gaming industry "will pay its fair and proportionate share of any new taxes in the same manner, and to the same extent, as any other Nevada business."

More specifically, the association supports a broad-based business tax that doesn't single out casinos. The state's narrow tax base, heavily dependent upon gaming and sales taxes that are susceptible to economic downturns, will lead future deficits for years to come, it argues.

The pamphlet doesn't aim to sway public opinion against raising taxes, Nevada Resort Association President and former state gaming regulator Bill Bible said.

"It says that we recognize there is a need for new taxes in the state of Nevada (and) that we are willing to pay our fair share of taxes."

It also aims two explain two points that are little understood, he said. Gross gaming taxes are levied on revenues before taxes, interest and other costs are taken out. The industry also pays a host of other taxes and fees along with other businesses in the state, including sales taxes, property taxes and business activity taxes, he said.

The casino industry paid $650 million in state gaming taxes and fees in fiscal year 2000, or about 40 percent of the state's general fund. Major casino companies accounted for nine of Clark County's 12 largest taxable property owners in 2001, the brochure says.

The content appears predictable, industry observers say. One sentence, however -- that all new taxes must be "related to the taxpayers' ability to pay"--will likely spur future debate.

"That's probably the most revealing part," Hobbs said. How much any taxpayer can afford depends on whom is asked, he added.

That statement might be contradictory given one tax suggestion on the table, said Kara Kelley, president and chief executive of the Las Vegas Chamber of Commerce.

That proposal would tax businesses' gross receipts, which accounts for money taken in but not expenses that affect a company's ability to afford the tax, Kelley said.

Overall, she said, the brochure makes a sound case for two key points -- that the gaming industry already contributes the lion's share of state taxes and that any new tax should include other businesses.

"What's important for people to recognize is that (casinos) will pay a larger share" of any proposed taxes because they are dominant, she said. "To gaming's credit, they have never suggested shying away from that ... I don't think there's anything controversial here."

State senator and Democratic gubernatorial candidate Joe Neal, an outspoken critic of the casino industry, disagrees.

The brochure fails to mention the state's casinos attract crowds of tourists who end up using police, health care and other services, Neal said.

"Somebody has to pay for that," he said. "(Existing gaming taxes) are not sufficient enough to take care of that temporary population that comes here and impacts us on a daily basis to the tune of 350,000 people per day."

The largest component of the state's budget goes to education, which isn't influenced by the tourist population, Bible replied.

"It's easy to say but the numbers just don't bear that out," he said.

Neal also finds fault with a chart that cites relatively low profit margins generated by the gaming industry compared with the financial services and telecommunications sectors. Sources cited include Forbes, the state Gaming Control Board and Arthur Andersen.

Gambling activity yields higher profits than many other industries because most returns come from slot machines, which have low overhead costs, Neal said.

Nevada's favorable tax climate, which includes no corporate or personal income taxes, has fueled the state's population growth, Vilardo said. Newcomers clearly want to maintain the status quo and require the industry largely responsible for that benefit to pay up, she added.

"Whenever there's been discussion about the need for additional revenue ... people call and say, 'Why should we vote to increase this tax? Gaming should pay for it.' "

Longtime residents are more likely to factor in other concerns that could bolster the industry's position, Vilardo said.

As the brochure points out, competition from nearby Indian casinos and other gambling jurisdictions nationwide have eaten into Nevada casinos' profits, she added.

The Taxpayers Association, like the Las Vegas Chamber of Commerce, supports a change in tax structure. The association has proposed to the task force a policy that would broaden a tax on entertainment venues, among other things.

The chamber would favor a broad-based business tax if the new system could be accountable for funding needs that are important to the business community, such as education, Kelley said. The organization has yet to present a formal position on taxes.