The announcement that the Nevada State Education Association (NSEA) would attempt a ballot initiative to raise the gross gaming tax in Nevada came as no surprise to anyone, especially executives at the state’s major casino properties.
For several months, rumors had been flying about one and possibly two initiative petitions that would change the state Constitution and raise the gaming tax. The teacher’s union proposal is by far the more modest of the two, seeking to raise the rate by three points to 9.75 percent. Another, by community activist and attorney Kermitt Waters, would nearly triple the tax to 18.25 percent (and also eliminate property taxes).
Many lawmakers, who have had the opportunity to raise the gaming tax but have resisted in the past, said they feel that while raising the gaming tax slightly might be one part of the solution, any proposal should include other industries and not just single out one player. In addition, they cannot ignore warnings from independent industry observers who have said any significant increase in the gaming tax would destroy future investment in Nevada.
The teachers union has had success in the past when they threatened to go to the ballot for increased taxes to pay for education (and raises for their members). In 1990, they threatened a corporate income tax initiative that would have severely impacted the revenues of casinos. The union even qualified an initiative that went to the ballot that year as Question 10. At the last minute, however, a deal was struck amongst the parties to consider a “Business Activities Tax” at the 1991 Legislature, and the union backed off, allowing the proposal to be defeated at the polls.
Perhaps the casinos will agree to a modest (maybe 1.75) increase, as long as other industries are also forced to feel the pain as well. Gaming officials will undoubtedly come back with some counter-proposal, perhaps their own initiative that would include a variety of tax increases designed to increase revenues and perhaps to help fund Nevada’s transportation needs.
Recent polls have shown great support for raising the gaming tax (although not for the idea of raising it to 18.25 percent). Bill Bible, executive director of the Nevada Resort Association, responds that of course people support the idea of raising more money for education, especially if they won’t have to pay for the increase out of their own pockets.
Nevada has the lowest gaming tax of any jurisdiction in the country. It is also the only venue that has unrestricted and competitive casino licenses. In all other jurisdictions, licenses and competition are extremely limited, making higher taxes feasible for companies.
The NSEA will have to collect more than 50,000 signatures to qualify the initiative, which would then appear on the 2008 and 2010 ballots before it could become law.
The smart money is being wagered that a solution will be arrived at long before that time.