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David McGrath Schwartz

Teachers union, gaming companies reach deal

27 May 2008

LAS VEGAS, Nevada -- When it comes the state's dire financial affairs, the language is coded in the negative. No new taxes. No more state government. No raises.

On Monday night, the teachers union and three of the big gaming companies reached an agreement that would send about $180 million a year to the state in the form of higher hotel and motel room taxes. In exchange, the teachers dropped a proposed ballot initiative that sought to increase the tax on gaming.

Wynn Resorts, Harrah's Entertainment and Station Casinos agreed to push for a 3 percentage point increase in the room tax rate.

MGM Mirage and Boyd Gaming have not endorsed the deal.

And a number of legislative hurdles remain, including Gov. Jim Gibbons and other Republicans who argue that using the increase for a narrow purpose amounts to "earmarking." (An aside: That word is widely used in Washington, D.C., to mean pork barrel spending. Although final language is pending, the Nevada room tax proposal would not resemble that kind of earmark, but borrowing the term deftly freights the proposal with Washington baggage.)

The room tax agreement has reopened the rift between gaming companies and the broader business community over who should pay taxes. It's an issue that has been simmering since the 2003 tax fight, when Gov. Kenny Guinn tried — and failed — to push through a broad businesses tax.

Casino companies, which pay a gaming tax, believe they are unfairly being asked to contribute more in the form of a room tax, while most other businesses would continue to pay no state taxes.

"With this compromise getting approved, lawmakers shouldn't look to gaming again for quite a while," one political consultant said.

Others hint at an even stronger pushback.

"Just wait," said one casino executive, who declined to elaborate.

Chances of a new business tax passing soon are next to nil, with Gibbons holding to his "no new taxes" policy and the requirement that any tax increase have the support of two-thirds of the state legislators.

What's more, history suggests that it's an extremely difficult sell at any time. Before the 2003 attempt, another tax increase failed in the early 1990s.

One optimistic gaming lobbyist said he hoped the Greater Las Vegas Chamber of Commerce would step up to help the state with its budget shortfall, which is approaching nearly $1 billion this budget cycle and $800 million over the next two years.

Unsurprisingly, the chamber of commerce says that now is not the time to raise taxes.

Hugh Anderson, chairman of the chamber's government affairs committee, said the state needs to study how it's spending the money it has, particularly the size of government and retirement benefits.

"We're all for having the best education system possible, we're all for the best transportation system possible, we're all for making sure the vulnerable population is attended to the best we can do," Anderson said.

But not now, "If you start increasing taxes at this, the worst time for many businesses, you'll encourage small business to close doors or lay off people," he said.

Once again, the language is negative.

So how would you get the chamber to talk about a tax?

One veteran of the political game fired the question back: "How did the teachers do it? Put a gun to their head."

The gun the teachers used, of course, was a ballot initiative.

It turned a no into a yes.

Teachers union, gaming companies reach deal is republished from