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September 18, 2014

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state government:

Please, sir, may we tax you more?

Nevada history repeats at special session — lawmakers hesitant to tax industries that are reluctant to pay

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Sam Morris

Gov. Jim Gibbons leaves the Legislative Building after meeting with Assembly and Senate leaders behind closed doors on Day Four of the special session Feb. 26 in Carson City.

Special Session - Day 4

The cheerleading team from Legacy High School, in town for the state cheerleading championships, arrive for a tour of the legislature building on Day Four of the special legislative session Friday, February 26, 2010 in Carson City. Launch slideshow »

Gaming lobbyist Billy Vassiliadis stepped to the microphone Friday and forlornly said this to state legislators trying to close a massive budget deficit: “I’m sorry to say, this year, for the first time, we just can’t help.”

Vassiliadis took pains to note that the decision was ultimately the lawmakers.’ But the language was revealing, implying that Nevada government, its university students and schoolchildren are a charity case, and the gaming industry a generous philanthropist that just can’t afford as many Christmas hams this year.

Also implicit in the remarks: You need our permission to tax us, and you don’t have it.

Vassiliadis was hardly alone, nor was his statement particularly remarkable. He was merely continuing a long Nevada tradition — on full display at this week’s special session — wherein special interests tell legislators what’s what, rather than the other way around.

Vassiliadis said afterward that he was merely trying to convey the pain the gaming industry is going through.

Still, Nevada has long relied on a process of reaching “consensus,” which is how players delicately describe the dominant role played by special interests, whose consent is a must on nearly every policy decision.

Sure enough, later in the day Gov. Jim Gibbons emerged from an hours-long negotiating session with legislative leadership to say he was reluctant to sign off on higher fees for gaming, in part, because the industry is opposed. Likewise, Gibbons said he couldn’t support increasing fees on mining claims because not all mines had signed off on them.

“It certainly is odd,” UNLV political scientist Dave Damore said of the arrangement, while laughing heartily.

But it’s also not surprising, Damore said. Although other states and Congress have powerful special interests, Nevada has just a few powerful players, a deep history of special interest dominance and a shallow pool of political talent.

“The Legislature seems unwilling to do anything unless (special interests) agree to it,” Damore said. “But the reality is, they need them for campaign contributions, and if they want to make significant changes in 2011, they need to be on good footing with them.”

Vassiliadis acknowledged that gaming often plays a large roll in decision making, but noted the industry is the state’s largest and funds 50 percent of the state’s budget. “It would be malfeasance for a Legislature or a governor not to consider the impact on its state’s largest industry,” he said.

Aside from that compelling argument, special interests have an advantage: All tax increases require two-thirds majorities, which are next to impossible to achieve given the Republicans’ and some Democrats’ routine rejection of all taxes.

With gaming and other businesses balking at paying more taxes or fees, the Legislature faces a key test of political will: Can it raise revenue from industries without their permission?

Despite what Gibbons said about mining consenting to new fees, the industry’s association has agreed to pay more. It is represented by many of the same lobbyists as gaming, including Pete Ernaut of R&R Partners and Vassiliadis, that firm’s CEO.

The language used by its lobbyists is also often revealing.

“Those industries have always been willing to help,” Ernaut said recently of mining and gaming, the implication, again, that they gave the Legislature permission to raise their taxes, and did so out of a sense of charity.

Another common phrase in the halls of the Legislature: Who is “at the table”? In other words, which industries have volunteered to “help out”?

To be sure, because of their willingness to “help out,” mining and gaming pay significantly more than other businesses, with gaming and its customers funding as much as half of the state’s budget. This occasionally pits gaming and mining against the rest of the business community, which is rarely willing to “come to the table.”

Here’s the recent response of Steve Hill, chairman of the Las Vegas Chamber of Commerce: “We’ve been at the table,” a reference, in particular, to the 2009 Legislature’s payroll tax increase.

Representatives from retail and trucking were firmly not coming to the table, arguing that the recession has been brutal on their industries, causing joblessness and bankruptcy. A tax increase would lead to more of the same, they said.

This special session has revealed, however, that some legislators are not convinced that small tax hikes will kill profitable businesses. Some have grown impatient with the Carson City status quo — that legislators must always be deferential to leading industries.

Senate Majority Leader Steven Horsford, D-Las Vegas, a former lobbyist with R&R Partners, insisted this week that corporations pay their fair share, and in the process turned his back on his old colleagues in the lobbying corps.

A potentially liberating factor for some lawmakers: term limits — 16 legislators will not face voters or political donors again unless they decide to seek some other office.

At a hearing Friday, Sen. Mike Schneider, D-Las Vegas, laid into the retail and gaming industries with gusto. He argued that Nevada’s businesses and citizens have suffered because of the state’s failure to invest heavily in education. He pointed to other states where businesses thrive despite a higher tax burden.

“I’ve been here so long, I’ve seen the ‘Group of No’: ‘No, we won’t participate because business is going to leave the state.’ I’m really tired of all of this,” he said. “It’s a bunch of bull.”

Schneider summed up the constant refrain on taxes heard every session in Carson City: “We were on this rocket ship, and we couldn’t do anything for fear we would hurt the economy. Now the economy is bad, and we can’t do anything. And I’m sure we can’t do something in the recovery because we don’t want to screw up the recovery.”

In a fusillade at gaming, Schneider said: “We have kept the lowest gaming tax in the world here ... Their stockholders have made big bucks in the last 20 years. Maybe (gaming) needs to go to (its) stockholders and say we need a little back now.”

Schneider said he would form a committee of commerce, tax and transportation in the next session. “We’re going to have a ‘come to Jesus’ meeting then.”

Finally, Schneider said: “Aren’t term limits great?”

Sen. Maggie Carlton, D-Las Vegas, also term-limited, sniped at the retail association lobbyist, Mary Lau, asking her whether her members approved cutting a state literacy program for children.

But it wasn’t just Democrats.

Sen. Randolph Townsend, R-Reno, long a friend of big business interests and another senator being forced out by term limits, had some blunt talk for the business community, although still couched in the language that sought industry consent.

The head of the banking association, Bill Uffelman, was in the middle of a speech about the struggles of his industry when Townsend cut him off.

“You’re here to talk about the fees on the table,” he said, “not to give lectures about the state of your industry.”

The lobbyist shot back: “The industry is in the swimming pool drowning and we’re talking about pouring some more water in there, just in case.”

Later, Townsend went back for more, blasting bankers for not taking part in the 2003 tax debate, during which legislators — and lobbyists from other industries — grew so frustrated with the banks’ unwillingness to “come to the table” that they hiked their fees in a flash of anger.

“The result when you don’t come to the table and work with us are the fees you are complaining about today,” he said. “This is not about lecturing you, but it’s to set the record straight: You need to be at the table and explain how your industry can help us get to where we want this state to go.”

Lobbyists raised their eyebrows at this fiery talk. The question is will it lead to higher fees on gaming or other businesses that refuse to give consent? Quite possibly, no.

Although there was no final deal late Friday, the Legislature will spare gaming, according to one legislative source.

Townsend found one industry that can be relied on. He heralded George Flint, head of the brothel association, for volunteering to pay more taxes and fees.

“For once, there is an industry that has come to the table,” Townsend said. “You are no longer at the bottom, Mr. Flint. Thank you.”

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