Las Vegas Sun

March 29, 2024

Editorial:

Gaming well is drying up

Expert explains why state can’t continue bleeding one industry

University of Nevada, Reno, gaming industry expert William Eadington makes a couple of good points when asked whether Nevada legislators should raise gaming taxes.

In an interview in this week’s In Business Las Vegas, Eadington notes the casino industry already is responsible for about half of the state government’s revenue. That analysis includes gaming and sales taxes paid by the industry.

This point is important given that gaming, while providing half the state’s tax revenue, employs just 27 percent of its workers. In other words, other industries in the state have been given a pass while gaming generates most of the state tax revenue.

Eadington also points out the gaming industry isn’t exactly flush with cash and is in no shape, financially, to endure any state tax hikes.

For proof of the industry’s difficult situation, one can look no further than the bankruptcy courts in Reno, Las Vegas and throughout the country.

Companies that have filed for bankruptcy in recent years include Tropicana Entertainment, Herbst Gaming, Fontainebleau Las Vegas, Station Casinos, Majestic Star Casino, the Greek Isles, Black Gaming and Riviera Holdings. Additionally, Planet Hollywood Las Vegas and Hooters Las Vegas have defaulted on their debt.

“Right now, there are a lot of questions about survivability,” Eadington said of the industry. “To go back and try to turn to the gaming industry one more time when it is in much more dire straits would be a mistake ...”

That thought by Eadington was made in an important context: For too long, Nevada has relied on gaming not just for the bulk of its tax revenue, but to drive and sustain the state’s economy.

This reliance on gaming has come back to haunt the state as it faces almost unimaginable financial problems. Legislators meeting in Carson City next year will have to deal with a staggering budget deficit estimated at anywhere from $2 billion to $3.5 billion. That could result in draconian spending cuts — based on current spending levels — of more than 40 percent.

No one can reasonably argue that state government spending should be cut substantially, given current spending levels that generally put Nevada at the bottom of the lists when it comes to investing in education and crucial government services.

“The challenge Nevada has on the tax issue is that this is a state that ranks just about at the bottom in almost every measure, especially on education and negative social impacts. There’s not a lot to be proud of. We just have a tremendous problem stepping up and saying this is the level of public services we need in all of these critical areas and we have to figure out a way of taxing ourselves to pay for it,” Eadington said.

His comments are further proof of what we’ve long argued: It’s time for the state’s nongaming industries to step up and contribute more revenue so Nevada can sustain the current level of government services and, in areas such as education, start making the substantial financial investments needed to drive needed improvements.

The UNR professor’s remarks also bolster the long-standing argument that more needs to be done to diversify the Nevada economy so it’s not so reliant on the gaming, real estate development and construction industries.

We’ve previously pointed out the state’s current “low-taxes” pitch has not resulted in significant diversification of the economy and that the supposed benefit of our low business taxes is far overshadowed by our inadequate schools and mediocre level of government services. Nevada, for instance, ranks 47th on the new CNBC list of the “Top States for Business” for the second year in a row.

CNBC measured the states in 10 categories such as education, technology and innovation, cost of living, and quality of life. Nevada placed dead last in education and tied with Rhode Island for last place in “economy” — a measure of overall economic strength.

It’s now time to focus on attracting companies that share our appreciation for properly funded schools and government services — the caveat being that such companies first are going to want to see some action on the part of the state to correct long-standing funding problems for our schools and state agencies.

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