Gaming industry maneuvers to dodge tax bullets

Dec 18, 2001 7:59 AM

Hold onto your wallet. The Governor’s Task Force on Tax Policy is angling to raise the cost of living in Nevada.

But after the panel’s first meeting last week, the gaming industry is an odds-on favorite to escape the tax attack.

“There are some who want to change the gaming tax tiers or change from a gross tax to a net tax. But the Nevada Resort Association isn’t about to let that change take place,’’ one insider told GamingToday.

Others said that while all taxes are “on the table,’’ the gaming tax will remain untouchable.

The eight-member panel and its technical working group are sympathetic to the industry. The most politically savvy and influential member is Mike Sloan, a Mandalay Resorts’ executive who has broad experience in local and state government. Heading the technical group is Bill Bible, chief of the NRA.

Committee members are on record in support of “broadening the tax base’’ ”” which means shifting more fiscal burden onto non-gaming enterprises.

“The gaming industry pays its fair share,’’ panelist Luther Mack, a McDonald’s franchise operator in Reno, declared even before the task force convened.

The tax talk comes at a dicey time for Las Vegas. Reeling from the East Coast terrorist attacks, Strip resorts laid off some 16,000 workers. The city’s unemployment rate of 6.7 percent is 24 percent higher than the national rate. In October, the state’s gaming win fell 8.03 percent, or $3.9 million, while visitor volume dipped 7.9 percent.

With a slow recovery in the cards, the state task force is reluctant to saddle Nevada’s No. 1 industry with heavier fees. Testimony from the public and private sector reflected that same concern.

“We’re against any increase in the gaming tax,’’ state AFL-CIO chief Danny Thompson told the panel. And no one on or off the panel disagreed. Thompson was seated next to Bible, illustrating the close relationship between labor and management.

Sloan, for his part, has floated the idea of hiking the property tax by boosting commercial rates, which would affect his industry. It’s far too early to say how that proposal might fare, however.

Besides raising taxes, sources say the panel is poised to seek a host of brand new levies. Those sources calculate that the state is looking to round up a whopping $1 billion in additional funds.

One potential money maker is a lottery. Mandalay Resorts invested in the California Lotto this year by purchasing the Dry Lake outlet at Primm, and legislation was introduced to allow Nevada casinos to sell lottery tickets. The bill failed but could get new life in a slumping economy.

Gaming taxes currently account for one-third of state revenue. When sales taxes, business license taxes, liquor taxes and casino-entertainment taxes are factored in, the industry ponies up roughly half the state’s income.

Analysts warn that any increase in the gaming levy could accelerate an exodus of casino capital. Jason Ader of Bear Stearns confirms that more states are aggressively pursuing legalized gaming as a new revenue source. And even though Nevada’s 6.25 percent top tax rate is lower than any other jurisdiction’s, new markets have fiscal appeal.

Harrah’s Entertainment is an example of a company that’s profiting from geographic diversification. The industry’s best performer since Sept. 11, Harrah’s shares rose further last week after two analysts raised their earnings forecasts for the firm.

Ader and David Anders of Merrill Lynch attributed the company’s surge to its strong presence outside Las Vegas. Harrah’s was also helped by its focus on lower-end gamblers who tend to travel shorter distances and were less likely to cancel trips after 9-11.

Meantime, the industry and its workers will catch a break if Congress agrees on a new stimulus package. Current proposals call for a depreciation bonus of 30 percent for three years, allowing businesses to immediately write off a portion of new business investments made after Sept. 11. Businesses also would be able to deduct current losses against taxes paid as long as five years ago, up from two years.

Additionally, workers who qualified for unemployment benefits would receive 13 more weeks of coverage. They also would get a 50 percent tax credit to help defray the cost of health insurance.