Tax foul-up comes home to roost

By Jon Ralston

Friday, March 13, 2009 | 2 a.m.

Sooner or later, the golden goose was bound to stop laying eggs.

And as two major gaming companies — Las Vegas Sands and MGM Mirage — watch their stock prices dip toward a pair of goose eggs, the Legislature has to deal with a different but equally fowl reality: The chickens are coming home to roost.

The Cassandras have come in many forms: A raft of dusty tax studies warning of too many gaming eggs in the tax basket. A Strip lined with Chicken Littles pointing to a falling revenue sky. And a pundit or two pointing out that the day will come when the goose will become barren, leaving the state and its residents muttering about tax policies that might have been.

The great irony of what is occurring as the Gang of 63 struggles this week to pass a room-tax increase is that the gamers, after years of diminishing their compelling case for a broader tax base by overreaching for corporate welfare in various forms, have become objects of sympathy. Sort of.

As I write this, Sands’ stock price is threatening to be measured in cents, not dollars. MGM Mirage is not far behind, seeing the next chapter in its existence not labeled “CityCenter” but “Chapter 11.” Boyd Gaming, trading just below $4 a share, has shuttered Echelon but wants to corral Station Casinos in some kind of revanchist, O. Henry-like maneuver. Harrah’s is not much better off; Wynn is not exactly robust, but better than its comrades.

The picture is bleak as the industry was happy to remind legislators last week when Nevada Resort Association President Bill Bible testified during a lengthy tax hearing in the capital.

“The major resort hotel companies that operate in Nevada are practically all experiencing levels of financial stress that have never been experienced as uniformly in the history of Nevada’s gaming industry,” Bible told joint Assembly and Senate tax panels. “What was unimaginable yesterday is now openly discussed in the media and elsewhere with overt speculation that a number of major gaming companies may find it necessary to seek the protection of bankruptcy courts because of sagging business volumes.”

Only a few days later, Kim Sinatra of Wynn Resorts would be begging the state Senate to enact a room tax while warning that a gross gaming tax increase would be a death sentence to an already struggling industry. A “killer,” she called it.

There lies the golden goose. And inside the corpse … no more golden eggs.

No one will seriously argue that when times were booming on the Strip — a period that encompasses most years out of the last 20 — the major companies could have paid more, should have paid more. But a lack of will by lawmakers and a lack of foresight by the companies made that impossible.

They wanted the tax target off their backs and affixed to businesses they saw as profiting from an economy they created — the wealthiest members of the Las Vegas Chamber of Commerce, which is the only lobby more successful than gaming in keeping its members’ tax burden remarkably low in comparison to almost any other jurisdiction.

And now, after all those years spent pointing the fingers at profitable companies other than themselves to tax, the casinos see their foes without any corporate incomes to tax. Their cries of poor, poor pitiful us ring as true as the gamers’ mewling.

And so as lawmakers wrangled over a paltry room tax increase that will not send any of these companies over the edge, legislators are seeing the fruits of decades of inaction. If they had put a few more gross gaming tax points on the major gaming companies, if they had passed a corporate income or gross receipts tax on business, the sky that is falling now would have started at a much higher altitude.

As they fritter away precious time, lawmakers do what they always do: Wring their hands, offer sops to voters and hope to return in two years to do it all over again.

The golden goose has no golden eggs left to feed the state. And that fowl smell emanating from Carson City is from a different kind of flock of birds — 63 chickens clucking too little, too late.