Casinos, chamber clash on tax plan

Erin Neff

Monday, Jan. 13, 2003 | 10:51 a.m.

Casino executives backing a gross receipts tax on business are willing to lobby the Legislature, setting up a potential battle between gaming and the Las Vegas Chamber of Commerce.

Both Terry Lanni, chairman and chief executive of MGM MIRAGE, and Phil Satre, chairman of Harrah's Entertainment, said they would individually lobby lawmakers on behalf of the business tax.

"From our company's standpoint, we are very supportive of the gross receipts tax," Lanni said in an interview with the Sun. "In the spirit of equality and fairness, it's time for the other businesses and companies in Nevada to come to the table."

Satre, the new chairman of the American Gaming Association, said he has supported the proposed one-quarter of 1 percent tax on the gross receipts of business over $350,000 since the idea was first discussed.

"I know I personally am prepared to spend more of my time discussing the issue," Satre said. "We have significant needs in this state, whether they are in education or health care or otherwise, and they can't be addressed solely by the gaming industry."

Kara Kelley, president and chief executive of the Las Vegas Chamber of Commerce, said she has had meetings with gaming executives, and thinks this is one area in which her organization will disagree with some of its most powerful members in the gaming industry.

"We happen to agree that the state needs more money, we happen to agree that there needs to be more money for education," Kelley said. "The one thing we're in disagreement on is this one particular tax."

The tax was recommended as part of the Governor's Task Force on Tax Policy's 1,100-page study of the state's budget structure and potential sources of new revenue to fill what has been determined to be a $704 million deficit in the coming two years.

Mike Sloan, a member of that appointed panel and a senior vice president at Mandalay Resort Group, lobbied heavily for the gross receipts tax as a way to target businesses based outside of Nevada such as Bank of America and Target.

The business community, led by the Las Vegas and Reno chambers, has strongly opposed the tax, saying it cannot be fairly applied to different businesses.

"We're going to go to the Legislature and make our own cogent arguments and have that as part of a very healthy policy debate," Kelley said.

Gov. Kenny Guinn will unveil his budget as part of his State of the State address Jan. 20 in Carson City. The governor has not said whether the gross receipts tax will be a part of his budget, however he has indicated the state needs at least $704 million in new revenue to stay even.

And, he has pledged increased spending in certain areas such as per-pupil spending and teacher pay.

The total tax hike sought in his State of the State address could top $1 billion, including increased taxes on cigarettes, liquor, property, gaming and new taxes on business and amusement activities.

Gaming has said it will accept a quarter percentage point increase in the gross gaming tax -- from 6.25 to 6.50 percent -- and would pay the gross receipts tax on its non-gaming revenue.

Some of the gaming industry's leading executives who spoke at the American Gaming Summit at the Rio on Friday discussed the fragile state of their industry, and how additional taxes could halt growth.

"This is not a good time for creating an environment with growth prospects," said Paul Rubeli, chairman and CEO of Aztar Corp., the company that owns the Tropicana. "The next great jurisdiction is going to be taxed to death and those politicians that think they can just tax the bejesus out of this industry will learn that's just not going to happen."

Both Rubeli and Lanni discussed how 43 states have deficits and some, such as New York and Massachusetts, are looking at introducing gambling to bring in new revenue. In Maryland, for example, lawmakers are considering selling gaming licenses for about $1 billion apiece.

"You have to bring in industry that has an ability to pay," Lanni said during the summit.

Rubeli said the recent announcement that quarterly earnings for gaming companies were not going to meet expectations -- and the subsequent drop in gaming stocks -- are indications of the fragility of the industry.

Property and liability insurance costs have risen 300 percent, he said. Gaming taxes have gone up 10 to 50 percent in the Midwest. Energy costs have risen and health care costs for employees have risen 20 percent. For Rubeli, who also has properties in New Jersey, Atlantic City property taxes have also gone up 20 percent in the past two years.

"We have to reduce costs," Rubeli said.

In an interview after the summit, Rubeli, who lives in Arizona, said he supports a tax plan that includes a gross receipts tax on non-gaming businesses.

"It's one based on logic," Rubeli said. "You want to have as fair and balanced a tax base as you can.

"It's that balancing, that if you step back from a greater good standpoint, leads you to support the gross receipts."

G. Thomas Baker, president and CEO of International Game Technology, said his company also supports some type of broad-based business tax.

"I think that the deficit is real, and we need to do something about it," Baker said.

IGT manufactures slot machines and does not pay gaming taxes. Initially IGT was one of a number of businesses or business groups that supported a business-backed alternative to the gross receipts tax.

That proposal, offered by Nevada Manufacturing Association director Ray Bacon, would raise $364 million from increased fees and taxes on businesses but would not include the gross receipts tax. That group has said a greater source of revenue could be found in a sales tax on services, even if health care and day care were exempt.

"A tax in some way that's shouldered by big business is going to have to be part of the answer," Baker said. "The gross receipts tax is a step in the right direction and we should also consider a sales tax on services."

Baker said the current plight of Nevada schools, which rank near the bottom on many national indices, affects IGT employees.

"I'm uncomfortable with the schools ranking as low as they are," Baker said. "That's not good for the state, and it's not good for IGT."

Baker said IGT's prospective employees want to know about schools, the quality of life and open space before relocating to Nevada.

Kelley joked that MGM MIRAGE isn't about to cancel its membership in the chamber over the difference of opinion about the gross receipts tax.

"I may be naive in saying this, but I don't think it's that divisive," Kelley said.

Ted Jelen, chairman of the political science department at the University of Nevada, Las Vegas, said he thinks the 2003 legislative session is setting up to be "nasty" because of the heavy lobbying from the powerful interests.

Jelen said he thought that by the end of the 120-day session, gaming would prevail in its call for a gross receipts tax.

"They are pretty clearly the more powerful player," Jelen said. "As the more regulated industry, they are more sophisticated about making their points, especially when money is concerned."