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Exploding a Myth

Nevada Casinos Fail to Support Education

Nevada gambling interests have long perpetuated the myth that the industry pays most of the state's bills, especially education. Nothing could be further from the truth. In fact, the gross gaming tax is only responsible for about eight percent of the state's annual budget.

That the myth persists beyond state borders is evidenced by letters to Sen. Neal such as the following:

Dear Mr. Neal:

I am a student at the University of Oklahoma. I am doing a presentation on why Oklahoma should legalize casino gaming. My emphasis is on how gaming taxes would support Oklahoma school districts. I would appreciate information on the current Nevada law that makes casinos pay a tax to help fund schools. I would also appreciate your opinion on how the law should stand.

Thank you for your time and consideration.

Nick Curcio, Norman, Okla.

Dear Mr. Curcio:

I am responding on behalf of Sen. Neal. Nevada has no such law. You are not the first to ask this question. Following, you will find my response, prepared in consultation with Sen. Neal, which went to someone at what appears to be a Texas (or is that Baja Oklahoma?) educational institution. I strongly recommend that you use the search engines at this site and at Nevada Labor to flesh out your research. At Nevada Labor, I especially direct your attention to the Casinos Out of Politics section.

You will not find much to bolster your case from this quarter. The gambling industry has long been the nemesis of Nevada education, recently adopting a strategy of scapegoating non-gaming business for the fact that the state stands in increasingly poor financial condition. Indeed, industry leaders have even accused some businesses of paying no taxes at all. Their latest strategy is to blame the state's anemic economic diversification efforts for bringing in non-taxed businesses.

That fraudulent assertion and more were soundly refuted by a Nevada Commission on Economic Development study which you may access from the front page of this website. You will also find it among a group of recent analyses posted with the text of a speech by Sen. Neal.

The state study represents the first-ever "smoking gun" evidence, which definitively demonstrates that gambling in Nevada does not pay its fair share of taxes.

The industry does not really care about supporting either education or economic diversification. It wants no competition for our large, undereducated, low-wage labor pool. Please see my column of October 3, 1999 and a number of other items accessible through the search engines.

You would do well to keep Whittier (Calif.) College Prof. I. Nelson Rose's comment in mind when suggesting expansion of gambling: "When gambling is everywhere, it will be nowhere." The only way communities can justify such seemingly painless "voluntary taxation" lies in the proposition that it takes money from the pockets of people who live elsewhere. Once that argument can no longer be made and gambling begins to devour its own home communities, it will begin to be banned. We have long and sorry experience here as to the social costs extracted by the industry, again something you may review via the search engines and the news links below.

If your thrust is education, I further suggest you look at educational impacts in Mississippi. In one community, a sorely needed new school was placed in the most affluent -- mostly white -- part of town.

You might also look at the California Indian Gaming Website as another resource. Daily updates are available.

Thanks for your interest and please let us know how else we may be of service. We would like to see the result of your research.

Be well. Raise hell.

Andrew Barbano

Date: Tue, 2 Nov 1999 02:24:22 -0800
Subject: Gambling taxes and schools
From: Walsh Library walshlib@tcjc.cc.tx.us

Does a share of gambling taxes in Nevada go to support education? How much?

Dear walshlib@tcjc.cc.tx.us:

The quick answer seems to be "no."

Not only does the gross gaming tax not go to schools, but Steve Wynn's art tax loophole/casino art subsidy places another shunt to gambling from students. (Sen. Joe Neal's site is loaded with articles on the issue, as is Casinos Out of Politics. The new search engines make additional information easily retrievable.)

The most vaunted (and expensive) of all studies of Nevada taxation is the Urban Institute/Price Waterhouse study submitted to the 1989 Nevada Legislature. At the time, I got a copy which consisted of five spiral-bound volumes weighing more than 25 pounds--the all time Silver State champion for cost and dust gathering surface area. As I recall, it cost about $400,000.

It was later published in book form by the University of Nevada Press. Curiously, someone purchased every remaining copy just at the time Sen. Neal introduced his gaming tax hike in the 1999 legislative session.

I escaped with the last one. Here's an excerpt:

"State aid to school districts in Nevada is based on total guaranteed support levels, which are tailored to each district and from which state-mandated, but locally generated, resources are subtracted. The difference between total guaranteed support and local resources (a one-and-one-half-cent sales tax known as the Local School Support Tax and a twenty-five-cent a valorem tax on real property) is state aid and is funded by the Distributive School Account. The aid formula allows for differences across districts in the costs of providing education and in local property wealth...School districts receive additional revenue that is not part of the guaranteed school support program (which is) intended to cover about 85 percent of the districts' general fund needs. The balance is to be generated through an additional fifty cents of ad valorem tax on real property, motor vehicle privilege taxes, franchise taxes, and other local and federal revenues."1

While the relative percentages of sales v. property taxation noted in the 1989 study, above, have changed, the mix of taxes remains the same and the gambling industry is still absent. This is why Steve Wynn's casino art tax break is so egregious. It takes money from sales/use taxes, a good portion of which are earmarked for the Local School Support Tax.

In 1976, California voters passed property tax-slashing Proposition 13. In 1980, based largely on vague but glowing promises of something better from first-term Republican Gov. Robert List, Nevada voted down a similar petition, Question 6. List's post-election solution involved raising sales taxes in order to cut property taxes - the infamous Tax Shift or Tax Shaft of 1981. Large property owners such as casinos became the principal beneficiaries of what began as a populist homeowners revolt.

The sales tax hike continued and worsened an unfortunate long-term trend toward regressive taxation which penalizes low-income people. Nevada's dependence on the unstable sales tax began in the late 1940s, according to longtime Nevada reporter Dennis Myers of Reno's KOLO TV-8 and the Las Vegas Business Press.

In a column in the July 23, 1999, Daily Sparks Tribune, Myers noted "as the baby boom gained force, the state's teachers led a drive for a school funding source. They chose the sales tax...The rate of collection is so gradual that taxpayers don't realize how heavily they're being taxed...But it has risen to such a level that it is no longer easy to hide - checkout clerks say they now get incessant complaints about the tax," Myers wrote.

In the depths of a severe, Federal Reserve-caused recession, Gov. List and the 1981 Nevada Legislature moved us to increased dependence on unstable sales taxes (only 25% of which are paid by tourists). As a result, we have one of the most regressive tax systems in the country. List was defeated for re-election in 1982 and now works as a gambling casino executive.

Things had gotten so bad by 1991 that the legislature passed the "BAT" (business activity tax, now re-labeled a business license tax). The names are a shuck to maintain the fiction that we have no state income tax on business. The BAT is a per-head tax on employees and gave big employers like casinos a 25% volume discount. Even a business tax had to be regressive to pass muster in the Silver State.

The BAT still does not generate enough revenue (less than 2% of the state's biennial budget) to make a dent in the state's needs.

The gambling industry will assert that it's the principal generator of the economy and pays lots of other taxes, but most of them are pass-throughs and casinos even earn a fee for collecting some of them.

They do pay property taxes, so in that sense they can say they pay some indeterminate contribution to the schools. However, their property values are not calculated like taxes on the average home. When their profits slip, they can and do apply to get their taxes reduced. (See my column of December 7, 1997 among other information you may access thru the search engines.)

Please keep in mind that whatever property levies casinos may pay do not constitute a tax on gambling operations. Their property taxation is based on market value of their businesses and in that arena gaming is no different than the corner barbershop or a manufacturer of kitty litter. Said property taxes remain quite low due to the 1981 Tax Shaft-- and all state and local taxes are fully deductible on a federal income tax return.

The only real tax the industry pays, the gross gaming tax, goes directly to the state's general fund. The industry gets back a full third in the form of corporate welfare programs such as:

1. Wynn's art tax break

2. The Lucky Bucks tax loophole, which allows casinos to deduct the full face value of promotional coupons and complimentary casino chips given to patrons. This effectively becomes a license to print money, as the Monopoly money passed out to customers is fully deductible from gross gaming taxes owed the state.

3. Hotel room taxes, hundreds of millions of which are annually shunted from parks and infrastructure to casino advertising and promotion through convention and visitors authorities statewide.

We will be happy to respond to any other queries.

Be well. Raise hell.


1. Ebel, Robert D., Editor; "A Fiscal Agenda for Nevada"; 720 pages; University of Nevada Press, 1990; pages 327-28. From a prologue: "This report was written jointly by analysts at the Urban Institute and Price Waterhouse under contract to the Nevada State Legislature."
ISBN 0-87417-153-9; ISBN 0-87417-154-7 [pbk.]

Sen. Joe Neal singlehandedly surrounds the gaming party
Barbwire by Andrew Barbano / Sparks Tribune/ 5-26-2002

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