The tax-hike conspiracy

Big interests out to get the little man

By Geoffrey Lawrence
  • Thursday, February 24, 2011

Small businesses in Nevada should beware. Backed by the state's major industries, lawmakers in the 2011 Legislature are targeting small and large businesses for punitive new taxes.

Over the past year, gaming and mining executives have held secret meetings with Senate Majority Leader Steven Horsford and Assembly Speaker John Oceguera to discuss strategies for sticking small business owners with the bill for excessive state spending. These conspirators aim to penalize all businesses with a new business franchise tax or a revenue-increasing expansion of the sales tax base (as opposed to the revenue-neutral expansion proposed by the Nevada Policy Research Institute).

As my colleague Steven Miller has highlighted in recent weeks, a central objective of many gaming executives has long been to hinder the growth of new businesses in Nevada through the imposition of punitive tax levies.

The Nevada Resort Association has engineered repeated attempts at a "broad-based business tax" — from its members' backing of AB 397 in 1987 to their backing of the "Anointed One," former governor Kenny Guinn, and his support for a new gross-receipts tax.

Now, with Horsford — CEO of an employee-training organization bankrolled by NRA members and the Culinary Union — installed as Senate Majority Leader, the state's most powerful interests undoubtedly see a new opportunity to try and push a punitive new tax onto small businesses. Indeed, Sen. Horsford has been the leading advocate for a new "broad-based business tax" in the Nevada Legislature and was the chief architect of the Nevada Vision Stakeholder Group, which was supposed to "review proposals for broad-based business taxes."

The NRA claims that the gaming industry contributes 46.6 percent of state General Fund tax revenues. However, this accounts for gaming's contribution to the "broad-based" taxes that are already in place, such as sales taxes, the modified business tax, the insurance premium tax, etc. The only tax levied uniquely on the gaming industry — as a result of lawmakers' 1931 deal to legalize gambling — is an industry-specific gross-receipts tax that currently accounts for only 27 percent of General Fund tax revenues.

While overstating the industry's contributions to state coffers, the NRA has historically argued that "growth doesn't pay for itself," because when new businesses spring up in Nevada, they do not contribute directly to state coffers. Instead, argues the NRA, the additional infrastructure needs required by economic diversification strain state resources, which are reliant on revenues from the gaming sector.

Hence, despite the widely acknowledged need for economic diversification, the gaming lobby has repeatedly pushed for new tax instruments to be imposed on other businesses in the state.

While the current effort shows gaming's (and mining's) desire to have other businesses bear the brunt of new taxes, many observers have pointed to more sinister rationales behind large gaming's repeated efforts to impose broad-based business taxes.

University of Nevada, Reno economics Professor Thomas Cargill has noted that gaming executives prefer not to compete for employees and that a tax environment more hostile to other industries would discourage potential competitors on the labor market. Others have noted that many gaming executives enjoy the influence they exercise over state policymaking and have focused on punitive taxes that repel the development of other industries as a means of protecting their political clout.

Whatever the motivation, one thing is clear: The state's most powerful interests and their politicians are targeting small-business owners. Although Horsford's machinations to impose a new corporate income tax failed, gaming and mining executives now are colluding with legislative leadership to develop new ideas for sticking it to the little man. These tax ideas would hinder the growth of native, small businesses — the true drivers of the type of job growth that Nevadans desperately desire.

The 2011 tax-hike conspiracy is intended to protect a narrow group of powerful individuals, but it is not in the best interest of most Nevadans.

The solution to the state's budget woes should instead come from the ideas highlighted by NPRI in "Better Budgeting for Better Results."

Until those reforms are implemented, conspiring lawmakers have no excuse for their ham-handed actions.

Geoffrey Lawrence is deputy director of policy at the Nevada Policy Research Institute. For more visit

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