Reid pushing for repeal of federal tax on some wagers

Wednesday, Feb. 18, 2004 | 11:27 a.m.

The Senate has approved a measure repealing a historic gaming tax that could save Nevada casinos more than $15 million a year.

But industry and political observers concur that several hurdles must be cleared before the proposal, approved by the Senate in a 76-21 vote last week, becomes law.

The repeal of a 0.25 percent excise tax on wagers placed in sports books, on keno games and on pull-tab games was attached to a six-year, $318 billion transportation bill that was approved by the Senate and will be assigned to a conference committee before the House takes up the legislation later this year.

Sen. Harry Reid, D-Nev., expects to be on that committee and authored the measure repealing the excise tax, which was been on the books since 1954 and modified over the years as part of the Internal Revenue Service tax code.

The tax code imposes excise taxes on the gaming industry and on specific wagers. Several exemptions are spelled out in the code, including exemptions on placing pari-mutuel wagers at race tracks, playing state lotteries and gaming on slot machines.

Sens. Chuck Grassley, R-Iowa, and Ben Nighthorse Campbell, R-Colo., in a bid to reverse a court ruling, attached a provision to the massive transportation bill to amend the Indian Gaming Regulatory Act and give Indian tribes the same authority to tax wagers as states have.

Pull-tab games, regulated and taxed similarly to state lotteries, would be exempt from the tax under the measure backed by Grassley and Campbell.

So Reid, pressing to prevent Nevada casinos from being the only entities affected by the excise tax, pushed for his own exemption plan.

"Gaming is the backbone of Nevada's economy and job market and repealing this tax will keep that backbone strong," Reid said in a statement announcing his efforts to repeal the tax.

Reid's office estimated that the repeal would save the Nevada gaming industry $100 million over the six-year life of the transportation legislation.

Frank Fahrenkopf, president and chief executive of the American Gaming Association, said the measure, if approved, would be a plus for the gaming industry. But he noted that not only would the measure have to survive the conference committee, but a threatened veto from President Bush, who says the transportation proposal is too expensive. Bush supports a six-year, $256 billion plan.

"They've been battling for six months on this transportation bill and I'm sure there's a lot of debate ahead," Fahrenkopf said.

He said the code has been modified over the years with exemptions added as new gaming jurisdictions took hold, but the original intent of the excise tax was to catch illegal gamblers and prosecute them for violating income tax codes.

"It really has little relevance to modern gaming," Fahrenkopf said, "but it was used as a means to catch some of the bad guys in the '50s."

A federal occupational tax on companies that accept wagers is a companion to the excise tax, but it would not be repealed. Under that tax, state-authorized sports books pay $50 per employee per year to accept wagers.