Nevada's gaming tax hike debate beginning

CARSON CITY -- While Nevada's gaming industry earned a $1.1 billion profit last fiscal year, it still cannot afford a tax increase, its chief lobbyist says.

But Sen. Joe Neal, D-North Las Vegas, said Wednesday a newly issued state report illustrates gaming clubs are able to pay higher taxes. "I'm going for broke," said Neal, referring to his bill to hike the tax rate for the major casinos from 6 1/4 percent to 8 1/4 percent of gross revenue.

The state Gaming Control Board released its Nevada Gaming Abstract, which details the revenues, expenses and net income of the 235 large casinos in Nevada. They received $13.8 billion from gaming, rooms, food, beverages and other ventures and kept 8.2 percent before federal taxes and extraordinary expenses.

Harvey Whittemore, chief lobbyist for the Nevada Resort Association, said he expects people, " who may be well intentioned but not well informed," to call for a tax increase, especially with state government facing budget shortfalls.

"Whether or not the gaming industry can afford additional gaming taxes is subject to debate. Everybody is entitled to an opinion," said Whittemore, a Reno lawyer. "The facts are the industry cannot afford a tax increase at this time."

Neal is zeroing in on the 20 big resorts on the Las Vegas Strip, which reported $845.6 million in profits or 12.7 percent earnings on revenue. He wants to change the casino tax structure so the major casinos that collect more than $72 million a year face an increase in their tax rate.

Nevada has one of the lowest gaming tax levies in the nation.

The report comes less than a week before the opening of the Nevada Legislature, which will be looking at the issue. A recent poll by the universities in Las Vegas and Reno showed 69 percent of those sampled favored increasing taxes on gaming if more money was needed for government programs. Only 14 percent opposed a casino tax increase.

Whittemore said, "To suggest the industry is so healthy they have cash falling out of their drawers is wrong." Keeping 8.2 percent of total revenue is not an inordinate return on investment, he said. And the percentage has been dropping every year.

In 1993, casinos earned 11.9 percent on their revenues. It was one-tenth of a percentage point lower in 1998 than it was in 1997.

And there are different problems in Clark and Washoe counties with the casino industry. Three or four clubs in Reno have closed, Whittemore said. In Clark County, there will be new hotels opening with 17,500 additional rooms.

"The investments being made approach $1 billion. That's just the ante to get in the game," Whittemore said. He said he did not know the rate of return on investment for the major properties statewide.

There are "extraordinary pressures" on the industry, he said, coming from Indian gambling in California and from the review by the National Gaming Commission. Some fear the national group may try to recommend a federal tax on casinos.

Knowing the annual state report would be issued, Whittemore said he's been prepared to refute the position "taken by folks who are not concerned with the health of the industry."

The casinos are the greatest contributor to the ability of the state to attract non-gaming companies from other states. The taxes paid by the industry enable these other businesses to move to Nevada to escape higher taxes in their home state.

"The tax benefits are allowed to be delivered, only because of gaming," he said.

Gaming taxes account for 34.1 percent of the state's tax collections. But business in and outside the casinos contribute to the sales tax, which is 38.7 percent of the state's tax receipts.

While the new report shows the 20 major casinos on the Strip enjoyed an $845 million profit, the 18 smaller casinos posted a $42.8 million loss or a return on revenues of minus 5.9 percent.

The 18 casinos in downtown Las Vegas registered a loss of $853,719 or minus 0.1 percent. In Laughlin, the resort town on the Colorado River, net income reached $45.9 million in the 10 casinos, or 6.2 percent on revenues collected. The 22 clubs on the Boulder Strip reported $57.9 million in net win or 8.7 percent of total revenue.

In Washoe County, the 10 largest clubs posted a $73 million profit or 6.1 percent of revenue.

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