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Best of Liz Benston

Gaming Guru

Liz Benston

Wall Street attacks gaming tax hike

18 January 2008

LAS VEGAS, Nevada -- Stepping up the counterattack on two controversial gaming tax increase proposals, a Wall Street analyst today called both initiatives "negligent," saying that many Strip resort projects now underway "won't pencil out" under a major tax hike.

"Neither the teachers union, nor an eminent domain lawyer, are qualified to materially facilitate change in Nevada's gaming economics," Deutsche Bank stock analyst Bill Lerner told a meeting of the Nevada Tourism Alliance.

Lerner was invited to speak at the event by the Nevada Resort Association, which is fighting the proposals.

Attorney Kermit Waters' plan to raise the gaming revenue tax to more than 20 percent and the teachers union plan to raise the tax three percentage points, to 9.75 percent, would be a "major disincentive" to build new resorts, Lerner said.

With the collective return on Nevada resorts being about 10 percent, the teachers plan would leave operators with a net return of 1 to 2 percent and a loss under Waters' plan, he said.

Money for luxury Strip projects now underway "would be much better off in a traditional savings account" with the tax plans because the projects were designed with profits after a lower tax rate in mind, he said.

After the meeting, Lerner said the state should host a widely-advertised, public debate on the issue, which is now polarized between casino executives, viewed as biased, and the teachers union, whose argument that "the gaming industry makes a lot of money so we should tax them more" is simplistic and ignores long-term ramifications.

"There's a lot more to this," he said.