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October 20, 2014

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WHERE I STAND (GUEST COLUMN BY TERRY LANNI):

Large businesses should provide for fair share of state’s needs

In August, Brian Greenspun turns over the Where I Stand column to guest writers. Today’s columnist is Terry Lanni, chairman and chief executive of MGM Mirage.

You’ve likely read in the Las Vegas Sun about an initiative to raise the room tax rate by one-third, or 33 1/3 percent, to raise $150 million annually, which will go the first year to the general fund and then to teachers’ salaries in perpetuity.

While we unequivocally support funding for education, this narrowly crafted proposal comes when our state budget is facing unprecedented cutbacks in every area including public safety and prisons, higher education, senior assistance, health care, child services and roadway construction.

While a room tax should be part of the solution to increase revenues, this proposal has several weaknesses:

• It doesn’t come close to fixing the $1.2 billion budget deficit, which may well rise even higher.

• It earmarks these funds, preventing elected leaders from addressing potentially more pressing financial needs.

• It simply extends our commitment to a broken tax system, one that has failed us for years.

Additionally, why are we asking tourists, whose children don’t attend classes in Nevada, to pay exclusively for teacher salaries? Where are our bankers, our retailers, our car dealers and other large businesses whose children go to school locally?

Here in Nevada, companies large and small have profited from vibrant growth and expansion for almost eight consecutive decades. When the state was smaller and its needs less complex, the policy established 75 years ago in which the gaming industry paid tax on gross revenues seemed to meet everyone’s wishes.

The gaming industry paid taxes in large amounts and others didn’t. Gaming was a much bigger portion of the state’s economy and provided the lion’s share of the tax revenue.

But while Nevada has seen, especially in the past 30 years, the development of far greater financial demands, our tax structure remains much the same as it was in the 1930s.

Since the 1970s political and community leaders began to look at potential solutions to addressing the increasing need for taxes. Study after study was commissioned, each one offering dire predictions if the state continued to rely so much on a single source of revenue: the gaming industry.

I believe it is important to make clear that tax policy in Nevada is not about gaming versus every other business in the state. Any one of us knows that in today’s social and economic climate, no one industry can be held responsible for providing for the needs of this ever more complex state.

History has proved that if you base revenues on single-source taxes that defy predictability, you will consistently run into trouble. Each of our past four governors has faced the need to make cuts in the state’s budget because our overreliance on gaming and sales taxes proved unreliable.

We must fix this flawed system and the solution must come from within the business community.

The time came long ago for every large business that benefits from operating in this state to share in the responsibility of educating our children and providing its fair share of funds for the state’s needs.

While we must protect small businesses and give them the chance to grow and thrive, the rest of us — gaming and nongaming — need to step up. We have to find the resolve to overcome political obstacles and accept the fact that a no-tax business environment is a relic of a bygone era.

Let’s create a stable, predictable large-business tax structure, one on which we can build a Nevada for future generations.

The most fair and straightforward means to achieving this objective is not to create a new tax, but to increase the existing Modified Business Tax, building in an exemption for small businesses. This will allow large businesses to participate in funding the services they require to be successful and allow us all to develop and maintain an appropriate quality of life in Nevada. Let me be clear: The gaming industry will also continue to pay the largest share of taxes in this state.

If we don’t take action today, we are guaranteeing continued chaos for future generations. We have the ability to change Nevada from a state where economic and social planning extends only to the next political season into a state where we provide properly for future generations.

In the next several months I’ll work to develop and refine this concept with my like-minded colleagues in the gaming and nongaming business community who believe the state of our state is deteriorating to unacceptable levels.

But, we must all face up to the reality of Nevada’s needs in a new century.

It’s up to us. And the time is now.

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