Chamber may rethink gross receipts tax

Friday, Jan. 31, 2003 | 11:25 a.m.

The Las Vegas Chamber of Commerce board of trustees would reconsider its opposition to Gov. Kenny Guinn's proposed gross receipts tax under the right circumstances, the chairwoman of its board said Thursday.

Lou Emmert, vice president and general manager of Sprint Corp. in Las Vegas and the head of the chamber's board, made the comment in a prepared statement. Emmert was responding to inquiries from the Las Vegas Sun following a presentation by MGM MIRAGE Chairman and Chief Executive Terry Lanni at the Preview Las Vegas 2003 event earlier in the day.

"While the chamber has been resistant to the proposed gross receipts tax in its current form, we would reconsider our opposition if our concerns are met and if we can find some common ground among those parties involved in the debate," Emmert said in the statement.

"Our members are counting on us to be responsive and engage on this issue beginning next week in Carson City."

Emmert was not available to elaborate on what concerns had to be met to reverse the chamber's opposition.

Kara Kelley, president and chief executive officer of the chamber, elaborated that the chamber's biggest concern is how a gross receipts tax would affect high-volume, low-margin businesses like grocery stores and service stations.

Because those types of businesses count on high numbers of customers to make up for the small profit margins per customer, they would be hit with a disproportionate share of the tax burden, Kelley explained.

"We have one member, a pharmaceuticals wholesaler, who said based on a quarter percent tax, the amount paid would amount to a 34 percent income tax," Kelley said.

Kelley said the governor may be addressing some other concerns, such as an exemption for small businesses. She said Washington state has solved some disparities in its tax legislation by enacting different rates.

"We have been very, very clear and resolute in our commitment to finding a solution through the legislative process," Kelley said. "We don't want to hurt start-up businesses or have something that is punitive to small businesses."

Kelley also said it's still early in the process and when the governor's legislation is introduced it's likely it will be amended after all the tax issues are debated.

"It's rare for legislation to be approved as it was originally drafted," Kelley said. "The Legislature hasn't even met and the governor hasn't even released a bill. There's lots of time for input and I think in politics, anything is possible."

Emmert's and Kelley's comments were in response to Lanni's presentation at Preview, one of the showcase events sponsored annually by the chamber and the Nevada Development Authority.

MGM MIRAGE has 35,000 employees in 10 Nevada casinos and is one of the state's largest taxpayers. Lanni's tax comments drew a mixed response from the crowd of about 1,000 people in the Cox Pavilion.

Some cheered Lanni's presentation, illustrating the divide between some chamber members over the organization's stance on the tax. Others were bitter that Lanni chose to deliver his message at the chamber's premiere networking event.

Lanni and other gaming industry leaders have been staunch supporters of Guinn's plan to enact a 0.25 percent gross receipts tax on annual business revenue above $450,000. Under the proposal, the tax would generate more than $220 million a year and help cover a budget shortfall of more than $700 million.

In his presentation, Lanni said the Guinn tax proposal "would be the fair thing to do, the right thing to do and the responsible thing to do."

He said the casino industry pays a disproportionately high percentage of taxes compared with other businesses and that the time has come to change the state's tax policy, especially with the gaming industry so vulnerable to tourism downfalls and competitive challenges from tribal gaming.

Lanni also refuted arguments that the proposed tax would discourage businesses from relocating to Nevada.

"Some have said that this tax is unfair and will end business development and growth as we know it," Lanni said. "I'm curious to know how many businesses we've already scared away by being 49th in the United States for educating our children. And it seems as though we're that low or close to it in any number of other important social measures. We can do better. We must do better."

Lanni also said he believes the tax would not raise the cost of retail goods, citing advertisements in fliers from Best Buy, Sears and Walgreens in several markets across the West.

"In every case, these businesses are paying taxes in each and every state other than Nevada, yet their prices remain the same in each place," Lanni said. "If the argument held any scintilla of truth, Nevadans would have been enjoying the benefits of low taxation by paying reduced prices for goods and services. Not surprisingly, this has not been the case."

Ken Ladd, chairman of the board of directors of the Nevada Development Authority, which recruits companies to relocate to Nevada, said the organization wants to strike a balance on tax policy that won't scare prospective clients away.

"Our position has been and continues to be that we understand the need for a broad-based business tax," Ladd said. "We do not propose a no-tax position, but a low-tax environment is beneficial to diversification."

The NDA has not taken a position on the tax. Ladd also acknowledged that some companies being recruited may come from states that have worse tax situations than Nevada's and that when those states solve their own revenue dilemmas, Nevada could still be a favorable option.

Other speakers at the event, conducted at the Cox Pavilion and the Thomas & Mack Center at the University of Nevada, Las Vegas, included Manny Cortez, president and chief executive officer of the Las Vegas Convention and Visitors Authority; Keith Schwer, director of UNLV's Center for Business and Economic Research; and Richard Lee, director of public relations for First American Title Co. of Nevada.

Cortez outlined the challenge of marketing Las Vegas with a daunting list of obstacles on the horizon. He said Las Vegas proved itself to be "recession-proof" during the gasoline crisis of the '70s and the Gulf War in the early '90s and that the city has nearly recovered from the Sept. 11 terrorist attacks.

But he said Las Vegas faces even greater difficulty convincing tourists to visit with a sluggish economy, depressed consumer confidence, a possible war with Iraq, an upturn in unemployment and volatility on Wall Street on people's minds. He also said California has become the No. 2 gaming destination in the country, thanks to the proliferation of tribal gaming which, Cortez said, is only going to get bigger when compacts are renegotiated between the California state government and Indian tribes later this year.

"We're starting to hear footsteps," Cortez said, displaying a map showing the proliferation of casinos in California and Arizona encroaching on Las Vegas. "Now you know how Custer felt at Little Big Horn, surrounded by Indians."

Cortez also showed the four new television ads promoting Las Vegas, one of which was rejected by the National Football League for broadcast during the Super Bowl because of a policy against connecting football games with gambling. None of the ads mention gambling.

Schwer summarized his statistical analysis of the state of the economy in his presentation.

He said 2003 would be "bittersweet compared with the robust '90s," projecting that most growth indicators would be on the upswing, but not at the spectacular double-digit pace of the last decade.

Schwer said there would be modest growth in visitation, gaming revenue, employment, personal income and population in Clark County.

First American Title's Lee presented his fast-paced Las Vegas growth video that has become the standard closing act for Preview.

He also said a new trend that could lead to increased casino revenue involves the marketing to younger players of games that are similar to computerized video games. Lee said "game-bling," as he called it, is a fusion of casino games and computer games that could increase play from gamblers in their 20s who have mastered Sega and X-Box.

Lee also said that while 2003 won't feature the opening of a new megaresort in Las Vegas, construction cranes would continue to operate in the city with new towers at Mandalay Bay and Bellagio, the Mandalay Place retail center between Mandalay Bay and Luxor, the Las Vegas Monorail project, a third luxury condominium tower at Turnberry Place, Hilton's timeshare resort project on the Strip, the "cloud" structure at the Fashion Show mall and Steve Wynn's Le Reve resort.

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