Columnist Jeff German: Gaming takes it on chin at session

Saturday, July 5, 2003 | 2:44 a.m.

THE GAMING industry found out this legislative session that it doesn't have the clout it thought it had in Carson City.

High-powered industry lobbyists so far have had their lunch handed to them by a group of conservative Republican assemblymen, who have managed to derail the industry's strategy to widen the tax base and at the same time have prevented the Legislature from sending Gov. Kenny Guinn a balanced budget.

Gaming has been unable to persuade lawmakers to approve a broad-based business tax that spreads the burden to the rest of big business, such as California-based banking institutions that earn hundreds of millions of dollars in Nevada, but pay next to nothing in taxes.

For years, casino industry leaders have fended off legislative efforts in Carson City to raise the 6.25 percent tax on gross gaming revenues. The argument has always been that gaming pours more than its fair share into the state's coffers. When taxes on sales, property and business activities are figured into the equation, the argument goes, the industry ends up paying for 50 percent of the state budget.

It sounds impressive. But the truth is the 6.25 percent revenue tax is the lowest in the nation among states with legalized commercial gaming.

Illinois just implemented a new graduated tax rate of 15 to 70 percent for its nine riverboat casinos, which each enjoys a monopoly in its respective area. The moreprofitable a casino is in Illinois, the higher its rate.

Indiana has a 15 to 35 percent incremental tax rate, and Louisiana's is a flat 21.5 percent. Even New Jersey, Nevada's chief gaming competitor, has an 8 percent tax on gross gaming revenues for its Atlantic City casinos.

In Nevada all of the years of not raising gaming taxes, and barely taxing other big businesses, finally caught up with officials this session. Guinn was forced to recommend the largest tax increase in history (it's now at $860 million) to meet the state's skyrocketing growth needs.

The industry worked hard to take the onus off gaming. It had the governor pushing the broad-based tax plan, and it had most of the Democrats in the Senate and Assembly on board.

But gaming underestimated the resolve of the 15 Assembly Republicans, who have been branded as selfish conservative radicals, to oppose a major tax shift.

Depending on how the Nevada Supreme Court moves to break the budget impasse, the industry still might prevail in the end. But in the meantime, gaming leaders are left wondering what went wrong this session.

In hindsight, the industry's strategy may have been doomed from the beginning.

Under Nevada's Constitution, it simply takes a majority of lawmakers to pass the state budget. But, because of a constitutional change approved twice by the voters, in 1994 and 1996, it takes a two-thirds majority to pass any new taxes to fund that budget.

This is the first time the two-thirds law has been used because lawmakers have not raised taxes since the constitutional change went into effect at the 1997 Legislature.

As a result, the Legislature passed this year's $4.95 billion budget by a 71 percent margin, but failed by one vote to get the two-thirds approval for the $860 million in new taxes.

The minority of Assembly Republicans, the anti-tax zealots, ended up controlling the session, leaving gaming's experienced lobbyists powerless to stop them and far short of the industry's goal to spread around the tax burden.

Something else also might have contributed to the industry's failings this session.

It may be that all of those years of arm-twisting in Carson City to avoid giving the state a bigger share of its billions of dollars in profits finally has worn thin.

It may be that gaming's power is no longer as feared as it was.

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