Friday, Oct. 7, 2011 | 2 a.m.
For decades, Nevada held a near monopoly on legalized gambling, other states put off by the social stigma and moral qualms surrounding the industry. But in their search for more revenue, nearly every state in the country, and many foreign nations, have come to embrace gambling as a way to pay for schools, universities, transportation and public safety.
These gaming latecomers have lured potential customers away from Nevada, and are now surpassing the Silver State in the tax dollars they generate for the state and local governments that sanctioned them.
Consider these recent figures:
• Indiana and Pennsylvania both collected more in direct gambling taxes from casinos in 2010 than Nevada, according to the American Gaming Association.
• Including money raised through lotteries — the Nevada resort industry has successfully fought creation of a state lottery since at least 1975 — 11 states brought in more gambling-related tax revenue than Nevada, according to numbers compiled by the Rockefeller Institute of Government.
• And Macau — the Chinese province that has exploded with financing and guidance of Las Vegas companies — has surpassed Nevada as the “gaming capital of the world” and with that — a fact almost unremarked upon — in the amount its government collects in taxes from the industry.
The government there charged an average tax rate of 39 percent on gaming revenue, and collected almost 10 times the gambling taxes paid to Nevada in 2010 — $8.1 billion, compared with the Silver State’s $856 million last year. Each month this year Macau has collected $1 billion in gambling taxes, and the government has only been able to spend half of what it collected, according to Reuters columnist David Cay Johnston.
Nevada charges a 6.75 percent tax on gross gaming win, the amount casinos keep after paying customers’ winnings.
The tax rate is the lowest in the nation and has seen little change as legal gambling has spread, starting in Atlantic City in 1977, then to riverboats, tribal gaming, and, in the past decade, to Asia and Eastern states looking to bolster tax revenue.
While the amount of money other governments are collecting from gambling grows, no Nevada elected official or advocacy group has proposed a gaming tax increase. (No such proposal has been considered by the Legislature since 2003, when the gaming industry agreed to a half-percent increase as part of a broader tax package.)
The Nevada Resort Association, the lobbying and advocacy collective for the largest industry players, says that with Nevada’s share of gaming rapidly eroding, now is not the time to consider raising the tax. The casino industry might pay a lower tax rate here than anywhere else in the country, and perhaps the world, but it still pays for a disproportionate share of the state’s budget, the industry argues.
Nevada Resort Association lobbyist Billy Vassiliadis said comparing gaming revenue with other states is “silly.” Nevada’s tourism industry employs so many people, and now has expanded beyond gaming, that “just to look at the gaming piece and ignore the rest would be irresponsible.”
“I don’t care who you compare us to. Nevada’s got a great deal,” he said.
When factoring in sales tax, property tax, room, liquor, tobacco and other nongaming taxes collected by the tourism and hospitality industry, it generated about $1.26 billion for the state in 2010. That equals 46 percent of the state’s general fund, according to the association.
Virginia Valentine, president of the Nevada Resort Association and a former Clark County manager, said increasing gaming’s payments to government would leave less for “investment for renovations and innovations.”
“I think you have to be very careful with the consequences of how it affects the state’s largest industry,” she said. “And before you look there, look long-term at broadening the tax base.”
Indeed, the casino industry has advocated spreading the tax burden to other Nevada businesses, supporting in 2011 a “margin tax” on businesses’ gross receipts and a sales tax on services.
But former state Sen. Bill Raggio, R-Reno, who retired before the 2011 session after over 30 years in the Legislature, said the question of whether gaming contributes enough to state coffers deserves consideration.
“Over time, there’s no question gaming in Nevada has had an advantage compared to how revenue is collected across the world, and other states,” said Raggio, a partner at the law firm Jones Vargas.
But Nevada lawmakers who believe more money is needed for government services, like education, warn against singling out Nevada gambling.
Assemblyman Tick Segerblom, D-Las Vegas, said that while figures from other states make it “clear that gaming can afford to pay more,” Nevada first needs to broaden the list of companies funding government services.
“The problem is nobody else pays anything,” Segerblom said. “Until we can make corporations pay something, it’s hard to ask gaming to pay more.”
Gaming, which is heavily unionized, has provided its employees with a living wage that has allowed the workforce to raise families and buy homes. Yet gaming’s dominance has also scared off some high-paying businesses.
“We have businesses that are not coming here that other states have,” Segerblom said. “We have buses driving around town with naked women. ‘What happens here, stays here,’ has gone around the world. What high-tech company is going to move here? It’s not going to happen.”
Comparisons between Nevada’s rake and the rest of the world’s are likely to continue with the exporting of our state’s No. 1 product. Major gambling operations have opened in Singapore and other Asian countries, while states like Massachusetts and Florida are consider offering concessions to “Las Vegas-style” resorts.
Steve Wynn declared in May that his was a Chinese company with a Las Vegas presence, and floated the possibility of moving its headquarters to Macau.
(Wynn representatives did not respond to a request for comment. MGM Resorts International and Las Vegas Sands, the other Nevada companies with major footprints in Macau, also did not respond to requests for comment.)
With Nevada companies so eager to do business in a locale that charges them more than six times the tax rate as here, some wonder if the state has gotten the best deal it could from its homegrown industry?
Guy Rocha, a historian and former state archivist, said, “I’m of the opinion that Nevada could’ve done better, or should’ve done better, but didn’t do better.” But with Nevada’s loss of its veritable monopoly on legal gambling, the window of opportunity has closed, Rocha said.
Nevada’s political history is notable for the small handful of lawmakers who chose to take on the industry, despite polls consistently showing popular support for raising the tax on gambling.
No one in Nevada “wants to kill the golden goose,” Rocha said. But, he wondered, “what’s wrong with the boy asking for a little more gruel?”
Nevada legalized gambling in 1931, and the gaming industry, as it came to be known, has with few exceptions had a close relationship with policymakers. Elected leaders, at the urging of the casinos, have kept Nevada’s tax rate low. The rate has only increased marginally since 1955, when Gov. Charles Russell raised it 2 1/2 points, to 5 1/2 percent for the largest casinos.
Today, it sits at 6 3/4 percent.
In Massachusetts, the tax rate being considered for the rights to one of three resort-style casinos is 25 percent.
The gaming industry’s role in Nevada politics has sometimes been subtle, sometimes not. In decades past, the industry ranked lawmakers with a color-coded system for friendly, not friendly, and neutral. It has quashed legislation that would have clarified state law on whether it should be paying sales tax on meals comped to customers and employees. (Nevada casinos are still seeking to recoup hundreds of millions of dollars in taxes they paid over the years on those comped meals.)
The most striking example of the industry’s influence in recent years came in February 2010, when lawmakers struggled to close a massive budget deficit and considered raising the fees that gaming pays to cover the cost of regulating the industry. Vassiliadis, the gaming lobbyist, went before the special session of the state Senate and said: “I’m sorry to say, this year, for the first time, we just can’t help.”
The message was clear: Nevada can’t look to gaming for help until the industry says so.