Governor between a tax pledge and a hard place

By Jon Ralston

Wednesday, Feb. 25, 2009 | 2:02 a.m.

The path began to clear Tuesday for Gov. Jim Gibbons to sign the third-largest tax increase in Nevada history.

Oh, how I have longed to write that sentence to expose the frailty — dare I say idiocy? — of silly no-new-tax pledges. You’d think that people would have had enough of silly tax pledges. But I look around me and I see it isn’t so.

That 35-7 Assembly vote Tuesday to pass a room tax paid almost exclusively by patrons of Clark County hotels also lights the fuse of a political bomb that could throw shrapnel at Gibbons and a fractured Assembly Republican caucus (and the GOP itself) while potentially vaporizing chances for a global tax settlement at session’s end.

Sources say the votes are there in the state Senate to pass the room tax, which is in the Gibbons budget. But none of the senators seems thrilled with the idea, I understand, especially as it was punctuated shortly after the Assembly vote with the announcement that Wynn Resorts lost just less than $160 million in the fourth quarter of 2008.

“The timing is just awful,” observed one legislative insider just after the vote. “Economically, it’s the worst thing to do. And it’s not part of the totality (of a tax plan).”

To see how economics can affect politics so dramatically, consider that when some of the major gamers signed off on this deal with the teachers union last year, the world was very different — politically and economically.

The gamers played their Br’er Rabbit game in negotiating with the teachers, who were having trouble qualifying a petition to raise the gross gaming tax. “Oh, please, please don’t raise room taxes instead,” the casinos cried, knowing they saved a fortune by getting their customers to pay instead of them as le bon temps roulez on Las Vegas Boulevard South.

But little did the casinos know they would be begging for customers in 2009. And now, the projections for the tax — originally $292 million and dropping every day — may not come close to the mark in the governor’s budget.

If anyone thinks this makes sense as tax policy — the enduring oxymoron in the legislative process — consider: As lawmakers vote to tax a hemorrhaging industry and force Southern Nevada to subsidize the state once again, the industry that thrives only in northern and rural Nevada is now selling its gold at more than $950 an ounce and is virtually immune from taxation. Mine that for common sense, folks.

The Assembly vote is sure to set off a political explosion by the right, especially given that conservative activist Chuck Muth and GOP Chairwoman Sue Lowden essentially warned GOP legislators not to vote for the tax.

Gibbons has insisted the tax plan does not violate his pledge because he has these fine-print exceptions, including if the affected industry gives him a thumbs up and if the public has approved it. This doesn’t completely meet both those tests — the gamers are split and only two counties, Washoe and Clark, approved it (although most of the room tax comes from there).

The pledge Gibbons signed when he was running had no such fine print: “I, Jim Gibbons, pledge to the taxpayers of Nevada and all the people of this state, that I will oppose and veto any and all efforts to increase taxes.”

Any and all. Pretty clear, isn’t it?

I suppose Gibbons could change his mind and veto the tax should it pass the Senate. And would anyone be surprised if the erratic governor vetoed a plan that he put in his own budget?

Assembly Minority Leader Heidi Gansert voted for the tax and now has seven anti-tax Republicans — half of her caucus — on the record voting the other way. Is this a harbinger that she is really the leader of only half a caucus when it comes to tax issues? Or an aberration? We will see.

For those who want this exemplar of fine tax policy to pass, they better hope the Senate vote is held soon, lest the Muth-Lowden Axis of Non-Taxation get traction. The teachers are helped by MGM Mirage going all Switzerland after being so adamantly opposed for so long, perhaps counting noses or not wanting to infuriate the speaker and others by blowing a $200-millon-plus hole in a budget most think is underfunded.

So once the Senate, as expected, passes the tax, it will land on Gibbons’ desk, where he can cement his position as one of the most taxing governors in state annals.

I can’t wait for the signing ceremony. I wonder if the governor will serve crow.