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Gaming Guru

Jeff Simpson

Gaming's story hasn't sunk in

15 October 2007

LAS VEGAS, Nevada -- I've been talking to casino executives for the past month about the industry's lame efforts to head off initiative petitions that would raise the state's gaming tax, and one thing is clear.

The casino bosses are seething.

And they should be.

They are furious with those who would use the initiative process to raise taxes on one targeted industry.

They're angry at the initiative system, which takes the power to decide matters from elected officials.

They're also frustrated with the voting public, which, if an election were held now, would certainly vote to increase the tax casinos pay on the money won from gamblers.

And some casino bosses even acknowledge that the industry's efforts to educate the public about how much the industry already pays - almost half of the state budget comes from casino-connected taxes, including the percentage-based gaming tax - have failed.

It may be an unpopular perspective, but I think the casino bosses are right.

Leaving aside the industry's impotent public relations efforts, the fact is that raising the gaming tax by 3 percentage points is a 44.4 percent increase.

And the reality is that the casino industry already pays more than its fair share of the state's tax burden.

And most of the rest of us, especially nongaming businesses, pay too little.

Politically, that's a near-impossible message to sell.

Almost no one wants to pay more taxes, and almost everyone likes the idea of taxing others instead of himself.

Gaming taxes are viewed as an appealing tax, as are hotel room taxes, rental car taxes and live entertainment taxes, because non-Nevadans pay a big portion of those levies.

But we live in a tourism-driven economy in Southern Nevada.

One of the reasons we so successfully lure tens of millions of tourists is that we have the most spectacular resorts in the world, and the companies that build them regularly up the ante and outdo the resorts that used to be best.

For example, within two years CityCenter, Encore and Palazzo will likely replace Wynn, Bellagio and Venetian as the city's top three properties.

Increasing gaming taxes by 44.4 percent will discourage new investment, and possibly start a downward economic spiral, as reduced investment will mean reduced tourism, which would cut gaming, hotel and other revenues.

There's no doubt that there are many important needs in Nevada that go unfunded because of our ridiculous tax system.

Public schools, universities, health care and transportation need substantial new spending.

But targeting the resort industry yet again is a poor solution, a stopgap remedy that has the potential to harm the tourist-based economy.

The casino industry should do more than try to defeat foolish initiatives that would raise the gaming tax.

It should spend liberally and intelligently and lobby strongly to enact a broad-based business tax that would enable the state to adequately fund its needs, now and in the future.

Unless the state augments its current tax system, the easiest response to any pressing need will be a gaming tax increase.

That would be bad for the casino industry and for Las Vegas.