NSEA sticks it to Culinary

Room tax hike sought by the teacher union would kill Culinary union jobs

By Steven Miller
  • Tuesday, November 11, 2008

It's been clear for a long time that little love is lost between the state teacher union and Southern Nevada's Culinary local.

The hostility spilled into public view earlier this year during the state's bitter presidential preference caucus. While Culinary backed Barack Obama, the Nevada State Education Association teacher union backed Hillary Clinton, even going to court in an attempt to block Culinary members from voting at sites set up on the Las Vegas Strip.

The more fundamental conflict, however, is economic - and built in. The teacher union is made up of government employees, while Culinary is a local of the private-sector Hotel Employee and Restaurant Employees International Union. By the nature of things, government unions always feed – either directly or indirectly – off of private-sector taxpayers.

Here in Nevada, although Culinary union officials rarely speak about it publicly, that conflict is even more intense.

Regularly, teacher union strategists go after the resort industry with higher-tax schemes that necessarily would mean a relatively weaker industry, less competitive nationally and internationally. The fact that these schemes would mean fewer jobs for Culinary union members is, of course, never mentioned.

The latest variant on this pattern is the current campaign by teacher union bosses to push the hotel room tax rate up to 13 percent. This scheme relies on the false assumption that Nevadans won't suffer if government slaps another 3 percent tax atop the average existing room rate. Supposedly, "the tourists will pay it."

The truth, however, is that it will be mainly the Culinary members who will bear the brunt – the maids, the cleaning people, the cooks, the bartenders, the cocktail waitresses, etc.

The reason is obvious, when you stop to think about it: Room prices in Las Vegas each day are set through an ongoing auction process. Hotel managers always seek to maximize the revenue from their hotel rooms by charging the maximum price that their highly sophisticated calculations indicate a particular room will go for on that particular night, given the supply of rooms available in Vegas.

"That's why," notes NPRI policy fellow Doug French, "room nights are priced much higher during convention season or New Year's Eve than on an average 100-degree August night with few conventioneers in town.

"If the hotels could have passed along the room tax in the form of higher room rates they would have raised rates already without the room tax."

So the teacher union's room tax hike – should it become law - will not immediately show up in the price of Las Vegas hotel rooms. Where it will show up instead will be in reduced hotel demand for Culinary union employees.

In short, because the room-tax hike, if passed, will raise the government-imposed costs borne by resorts, it will necessarily also reduce the resorts' net income.

In these new circumstances, the fiduciary duty that hotel managers owe to shareholders will force managers to re-establish optimal profitability by re-balancing costs against the now-reduced income. Staff cutbacks will almost certainly follow.

This dire process is already under way on the Strip, given the recent drastic drops in tourism occasioned by high gas prices, the international mortgage meltdown and the resulting credit crunch.

Yet over the next several years the situation facing the Nevada resort industry and its employees is most likely going to become even more serious than it is today. Not merely Nevada, nor just America, but the entire financial world is entering a perfect storm that promises to last several years. Everywhere asset prices are falling, financial institutions are weakening and central bankers are responding to these challenges with precisely the destructive ever-looser credit that produced the situation to begin with.

Given such a context, the NSEA's proposed 13 percent room tax – quite a bad idea in itself – merits a blue ribbon for Most Dreadful Timing.

For decades, to justify its proposed higher taxes on Nevada resorts, the teacher union has always pointed to the unmet educational needs of Clark County children. Yet those needs – primarily because of the union's stubborn opposition to needed reforms – remain unmet today.

Culinary would be entirely justified in attending to the needs of their own families, rather than to the ever-insatiable appetites of NSEA bosses.

Steven Miller is vice president for policy at the Nevada Policy Research Institute.

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