Casino operators blast proposed comp taxes

April 16, 2002 8:50 AM
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A proposal to tax casino comps in New Jersey doesn’t have a chance of passing in Nevada. Gamers say the Detroit Tigers have a better shot at winning the World Series.

“It would be counterproductive, to say the least,’’ Nevada Resort Association chief Bill Bible said of New Jersey Gov. James McGreevey’s controversial plan to slap a 6 to 12 percent fee on freebies.

McGreevey sees a $33 million windfall for the Garden State if complimentary rooms and meals are taxed. But he’s run into instant opposition.

“If it’s more costly to comp people . . . it could impact gaming revenues and therefore impact the other state gaming taxes,’’ Timothy Wilmott told the Atlantic City Press. Besides, the Harrah’s exec and president of the Casino Association of New Jersey noted, “It’s a marketing expense, not something we sell.’’

Nevada regulators cannot remember any such idea ever surfacing here. And regulators and gamers tell GamingToday they’d be surprised if it did this year.

“We’re driven by comps,’’ says Greg Gale of the state’s audit division.

“Comps are how we get people here,’’ said Mike Sloan, executive vice president at Mandalay Resorts.

Sloan, who also sits on Gov. Kenny Guinn’s commission on taxation, says the panel is searching for ways to “broaden the tax base,’’ not to increase the burden on those sectors already paying taxes.

“Our industry is under threat. Mandalay made less than it did the year before and revenue is not growing,’’ Sloan said. Meantime, he notes that homebuilders headquartered outside Nevada are posting big profits. Net income, at Los Angeles-based Kaufman and Broad, which sold a majority of its houses in Las Vegas, was up 65 percent last year.

Despite an uptick in February, the Strip’s gaming win fell 10.2 percent during the first two months of this year. That followed a 12 percent decline in the October-December period after 9-11.

Still, money-hungry politicians may be tempted to tap into comps. In fiscal 2001, Nevada’s largest casinos dispensed a whopping $1.588 billion in free rooms, meals, drinks and other perks to customers — nearly five times more than Atlantic City comped. As gaming has grown, so have comps, Gale reports.

So far, though, even industry nemesis state Sen. Joe Neal, D-Las Vegas, has remained mum on the idea of taxing comps in Nevada. He may, however, resurrect his bid to hike the top gaming tax rate, which currently stands at 6.25 percent (New Jersey’s is 8 percent).

Within days of McGreevey’s proposal, MGM Mirage announced it was temporarily halting plans for a $1.5 billion casino in Atlantic City.

One of the single largest criteria we evaluate when making a financial decision is a relatively stable tax environment,’’ said John Redmond, chief executive of MGM Grand Resorts Division. “We’re definitely going to take a step back and re-evaluate the project.’’

Redmond added that work on MGM-Boyd Gaming Borgata project is too far along to change.

“We don’t like to do (comps), but it’s a competitive market,’’ Sloan explains. “On some of these deals (with high-rollers), even if you won, you lost.’’

Instead of tapping comps, and potentially crippling casino marketing, Sloan suggests that Nevada’s revenue-hunters look at non-gaming businesses that pay no corporate taxes. “If everyone paid, we’d be rolling in dough,’’ he said.

COMP DEALS

Nevada’s largest resorts reported the following comp allocations in fiscal 2001*

Rooms ..”¦$563 million

Food ”¦”¦..$503 million

Beverage ”¦$463 million

Other ”¦......$59 million

* Does not include comps on wagers, games.

 Source: Nevada Gaming Control Audit Division