Your Turn:
Richard Blakemore, Candice Pearce, Patricia Fladager

Casinos should be first to pay higher taxes

Special to the Reno Gazette-Journal
May 12, 2003

Television viewers cannot avoid the current saturation bombing by the gambling industry's five-year campaign to avoid taxation. The unsuspecting are led to believe that gambling funds about half of the state budget. Nothing could be further from the truth.

The clever commercials focus only on the "general fund" which represents only about a third of overall spending. In fact, most of the state's money comes from the federal government. The conservative Nevada Policy Research Institute recently pegged the gambling industry's true contribution at less than 10 percent .[A]

Nevada casinos not only enjoy the world's lowest gross gaming tax, they also get about one-third back through Nevada's generous corporate welfare subsidies. A recent UNLV study showed that the costs of gambling addiction very probably eclipse whatever remains.

Why should a state budget need to grow faster than the population? The Guinn-Hunt administration solved that longtime riddle with a study from the Nevada Commission on Economic Development. The research identified the creation of low-wage gambling industry jobs as the root cause of Nevada's fiscal crisis. Poor employment spawns our infamous prominence among states with the worst societal pathologies. Casinos privatize profits while socializing risk, placing the costs of growth on the backs of average taxpayers.

Devouring its host, gambling utilizes its huge Nevada proceeds to compete with itself by going into business in other states, some with taxes of 35 or 50 percent of gross.

News media constantly report that Nevada casinos now pay 6.25 percent on their gross win, a figure which has not changed since 1987. However, because the tax is levied in three mildly progressive tiers, the 6.25 percent level is never reached. Several years ago, the industry paid an effective rate of about 6.2 percent. In fiscal year 2002 (July 2001-June 2002), that fell to 6.0954 percent, specifically $554.6 million on a gross win of $9.1 billion.

Gov. Guinn says Nevada needs about $700 million just to stay even over the next two years. The industry cleverly manipulated the governor's task force which recommended a universal sales tax on every business. How much would the gambling industry actually pay under its own plan? Its spokespersons admit to about $39.5 million per year. However, allowing for proposed state credits and federal income tax deductibility, that small contribution shrinks to single digits.

Nevada casinos are so fabulously profitable that they switched to creative accounting in 2000, enabling the industry to show a paper loss just in time for this year's legislature. How can Nevada companies be losing money while investing billions in new enterprises in Las Vegas and worldwide? Because the only losses are on press releases.

Like two of three Nevadans, we support Sen. Joe Neal's call for a substantial increase in the gaming tax. A four percentage point hike would generate over $400 million a year while still leaving Nevada among the lowest. All such levies remain fully deductible on a federal return. We encourage Nevadans to call their lawmakers at 800-995-9080. They may also register their support at www.JoeNeal.org, where sources for this article are posted.

Before any taxes get raised, gaming must go first. Average citizens must motivate their lawmakers to avoid casino-caused fiscal collapse.

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Richard Blakemore represented rural Nevada as a Democratic state senator from 1972 to 1984. Candice Pearce served on the Reno City Council from 1995 to 1999. Patricia Fladager is former chair of Common Cause Nevada.

NOTES:

     A. "The constant Nevada Resort Association refrain that the resort-casinos provide '50 percent' of 'state budget' revenues had taken its toll. Never noticed were the occasional sotto voce admissions from the association that by 'state budget' was only meant the state general fund — currently only 30 percent of the entire real state budget. Nor had they registered that the '50 percent' figure was half-a-decade out of date, and that a more accurate figure was 33 percent of general fund revenues-in other words, about 9.9 percent (.30 x .33) of the real state budget. Few business people were aware that, according to U.S. Census figures for the year 2000, Nevada's non-gaming businesses had paid 81 percent of the business taxes that went to support state and local government. The gaming sector's share, on the other hand, had been a mere 19 percent." (Nevada Policy Research Institute E-Bulletin, 25 April 2003.)