Interests brace for big tax battle

By David McGrath Schwartz

Sunday, Dec. 14, 2008 | 2 a.m.

It was sitting out there like a big hunk of pork, ready to plug part of the state’s $340 million budget hole: a higher room tax.

It would bring in an estimated $125 million a year — albeit the projections were made pre-Strip apocalypse. Voters had already approved advisory questions, granting lawmakers the requisite political cover. And it passes the litmus test for a tax in Nevada — it hits the tourists.

Yet the room tax wasn’t part of the solution offered during Monday’s special session. Instead, according to sources, the gaming industry asked that it be held back, in anticipation that a broad tax increase will be on the table when the Legislature convenes in February.

Industries, interest groups and their lobbyists mostly sat out the special session, waiting for the bigger fight during the regular session.

“Today’s the battle,” one veteran lobbyist said. “The war is in the spring.”

In the meantime, industries are bracing for what seems to be inevitable: There will be a push during 2009 Legislature to raise taxes.

Gaming is not alone in fearing a tax hit, of course. Mining agreed to pay its annual tax bill early in the hope it will build goodwill or give it leverage for the regular session. (Legislators’ eye-rolls signal it won’t, just as the room tax might not spare the gamers.)

The rental car agencies, a favorite tax-pinata because their customers are mostly from out of state, did get hit during the special session. Lawmakers took a bit of their money. But not before the industry stood up and made sure people noticed it was getting taxed.

Given current revenue, the budget cuts for the upcoming fiscal years would have to total 34 percent of what the Legislature approved for 2007 and 2008. Democrats and many Republicans say it’s impossible to cut that much.

That means money will have to come from somewhere.

It’s likely to be a combination of more cuts, raiding local government coffers and new or higher taxes.

Interests affected by those three possibilities will have lobbyists and lawmakers trying to protect them. Public employee unions and local governments are bracing for a fight. There was a protest of about 200 people outside during the special session, clamoring about the effect of more budget cuts on schools and social programs.

But the jockeying over who gets taxed will perhaps be most intense.

The anti-tax contingent likes to ask what industry is doing well enough right now to absorb new taxes. Gaming revenue declined on the Strip in October by a record 26 percent from the same month a year, unemployment continues to rise and Nevada has, by one measure, the worst economy in the nation.

One ranking Democratic lawmaker said no call has gone out to industries asking that they come to the table with suggestions for taxes. But, the legislator said, looking to industries for suggestions is one way to come up with a plan to raise revenue.

That’s what happened in 2003, when Gov. Kenny Guinn was in office. Industries argued and jockeyed over who could afford what tax. Gaming companies came out on the short end, ending up with a higher gaming tax while the broad-based business tax that the industry fought for died.

The gaming industry will argue it cannot afford to pay more, that it’s others’ turn to pay. This time the argument could be more persuasive — a silver lining to those awful gaming numbers.

Whether the room tax will count as their skin in this game remains to be seen.