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July 22, 2014

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state budget:

Room tax hike: Sun’s winners and losers

How battle over 3-point increase shakes out

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The state Senate passed a 3 percentage point increase in the hotel room tax Tuesday, which current projections show will raise about $230 million, making it one of the largest tax increases in Nevada history.

With the Assembly having approved the measure two weeks ago and the governor saying he will allow it to become law (without his signature), the new money will appear in the state’s treasury beginning July 1.

The money will go to the state’s general fund for the next two years, after which it will be devoted to teacher pay increases and education.

Like every legislative battle, there were winners and losers. Herewith, the Sun’s list.

WINNERS

The teachers union

This process began nearly two years ago when teachers, again facing frustrated hopes in the Legislature, decided to go straight to the voters. Once they started collecting signatures, they drew three gaming companies — Wynn, Station Casinos and Harrah’s — to the negotiating table. From there the two sides agreed on an initiative petition for the room tax increase, gathering signatures so the Legislature would have to act or the measure would have gone to the voters.

The teachers got their money, worked with the three big companies and managed to show some clout in the Legislature.

They won a little ugly though, with legislators, and state senators in particular, irritated that the union had high-jacked the legislative process.

State Sen. Terry Care, D-Las Vegas, was blunt: “This may pass and you will consider yourself to have won. But I want you to know that if that happens, you may very well, in the long run, have lost.”

Assembly Speaker Barbara Buckley, D-Las Vegas

She was a key negotiator last summer between gaming and the teachers, and this sends a message: Buckley delivers. Also, the measure split Assembly Republicans in half, which Buckley no doubt rather enjoys.

Senate Majority Leader Steven Horsford, D-Las Vegas

In one of his first real tests, Horsford kept his caucus together and got the measure through, while strongly voicing his opposition to using initiative petitions to create tax policy. He was at times conciliatory, agreeing to delay the vote a day. Minority Leader Bill Raggio, the legendary Reno Republican, voted with Horsford.

The initiative petition industry

In California, initiative petitions are a cottage industry, with firms that specialize in writing petitions, collecting signatures and winning the campaigns. With the teachers getting their way, perhaps other interest groups will try to do the same, with the hired guns from our western neighbor driving up I-15 to join the battles.

LOSERS

Gaming

Even as casino winnings plunged 14.7 percent in January compared with a year earlier and casinos consider bankruptcy, the Legislature showed the gaming industry no mercy with a tax increase.

The gamers can hope the Legislature will factor this in, be their “skin in the game” or “contribution” when the Legislature raises taxes later this session, but even that might be far-fetched given the scale of the state’s crisis.

Raggio and Horsford are both solid allies, however.

The tax will largely be passed on to tourists but part of it might be eaten by the hotels when they negotiate big blocks of rooms with conventioneers. And if consumers pay more in room taxes, they may spend less on the casino floor.

Moreover, the much-vaunted industry looks weak. The companies were divided in negotiations, and even opponents would never fully commit to killing the tax increase. They stood by and watched as their proverbial ox got gored.

Perhaps some other interest group will do what the teachers have done, and who will stop them?

Chuck Muth and his merry band of libertarians

The firebrand activist hates taxes. His advice to Republicans has been to oppose any and all tax increases. His advice was ignored, by a significant margin in both houses.

Tourists

With room taxes now taking $13 instead of $10 on a $100 room, how many yard-long daiquiris can they still afford?

Southern Nevada

More than 98 percent of the new revenue will come from Clark County, but the proceeds will be shared with the rest of the state.

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