Reaping the Whirlwind

I’ve about decided that several of Nevada’s big gaming resorts secretly want the gaming tax increased.

Oh, I know—on the record the Nevada Resort Association is militantly opposed to such a hike, and thinks what Nevada really needs is a good new stiff tax on all non-gaming businesses.

But let’s look beyond the surface. First, let’s travel back into a history just a bit.

Back in 1991, as today, the Nevada Resort Association had already, for several years, been pushing the idea of some kind of “broad-based business tax.” The eventual result, emerging from the ‘91 Legislature, was the Business Activity Tax. The BAT, as it’s called, wallops every Nevada employer upside the head and compels them to pay the state $25 per employee, per quarter. It’s a curious public policy. The State of Nevada has decided to discourage employers from hiring people.

But that was okay with Nevada Resort Association strategists. Not only had their lobbyists secured for them and other big employers a special partial exemption from the law. They also had achieved their goal of imposing a new tax on all non-gaming businesses in the state.

Nevertheless, the actions of the NRA strategists soon came back to bite them. Business people around the state, naturally enough, were angered by what they saw as casino industry treachery, and in the next Legislative session, they made sure that the casinos, too, would henceforth bear the full weight of the BAT tax. Politicians in the Legislature—always eager to extend and expand a tax—were, of course, happy to oblige. And with the full support of the great majority of Nevada businesses, they removed the casinos’ exemption and required the casinos to pay the tax on every one of their thousands of employees.

Seems to me that something similar could happen again. If the old-line big casinos that make up the Nevada Resort Association should succeed in getting through the next legislature some kind of new, broad-based business tax, there’s a real chance that the entire casino industry will reap the whirlwind.

First, the people who run small and medium-sized businesses in the Silver State will, once again, feel completely violated by the casino industry’s self-seeking assault on them. It is highly likely that they will, as before, retaliate. Suddenly State Senator Joe Neal will be the least of the gamers’ worries. Nevada’s non-gaming business community, when aroused, has tons more political clout than Neal. All that need happen is that they adopt the same mindset as the gamers—that “it’s them or us”—that “either they pay, or we do.” And the casinos’ success would have forced them into that mindset.

So that’s one scenario that might lead an outsider to conclude that certain Nevada Resort Association insiders are intent on getting the gaming tax raised. A second scenario would also suggest this.

Let’s assume that Mike Sloan and Brian Greenspun—both of whom are sitting on the Governor’s Task Force on Tax Policy—get their way, and that state legislators eventually impose something like a small corporate income tax on all Nevada businesses.

At that point, you can kiss diversification of the Silver State economy goodbye. The number one reason why the non-gaming sector of the Nevada economy has seen booming growth over the last decade—adding more jobs in Clark County than the casinos—has been because this state does not have a corporate income tax. This information comes directly from surveys of new businesses conducted by state development authorities. Nevada has recently carved out for itself a very successful identity in the minds of American business people as the state that does not tax business investment and productivity. If we suddenly reverse course and start adopting the tax policies that made the Rust Belt into the Rust Belt, you can be sure that investors all over America—and even overseas—will take note. And even a tiny new corporate income tax will have this destructive impact. That’s because investors look at the trend, and if Nevada suddenly embraces even a tiny corporate income tax, that clearly is a new trend—one that will surely resonate throughout corporate offices far and wide.

Blocking further diversification of the Nevada economy would be a major strategic blunder by the Nevada Resort Association. For if major non-gaming businesses quit relocating into the Silver State, only the casinos will be here when the voters start looking around for someone to carry the tax load.

Steven B. Miller is editorial director for the Nevada Policy Research Institute.