Irony in Lanni’s proposal

By Jon Ralston

Wednesday, June 18, 2008 | 2:01 a.m.

At the very least, you have to appreciate Terry Lanni’s sense of irony: The MGM Mirage chairman who once went to the Chamber of Commerce’s home turf to lambaste businesses for not paying their fair share now is pushing an increase in the tax the Chamber of Commerce invented in 2003.

One week before state lawmakers convene for the Save the Governor Telethon — aka the 24th special session in Nevada history — Lanni has taken us back to the future with a proposal, first reported by the Sun’s Liz Benston and David McGrath Schwartz, to double the payroll tax from a minuscule 0.63 percent to a still-minuscule 1.23 percent. Coupling that with his idea to increase and divert room taxes to the state’s general fund, which could raise $800 million, the casino boss has provided the most comprehensive tax stabilization and broadening plan since Gov. Kenny Guinn did five years ago.

Indeed, it was during the 2003 session that the Chamber of Commerce, desperate for its largest moneymaking businesses not to have to pay a tax on their gross (as gaming does), sold out its small-business members (exempt from the gross receipts tax Guinn proposed) by lobbying for a payroll tax now embedded in state law. How beautifully ironic it is now to recall how vehemently the chamber advocates told everyone five years ago that the gross receipts tax, even though it was proposed at a minuscule(!) rate, was unacceptable partly because future Legislatures would tweak the rate upward. And now look at the tweaking Lanni wants lawmakers to do with the payroll tax that chamber higher-ups proposed in 2003 to protect big businesses, especially out-of-state megacorporations with few employees. And wait until Lanni caps it so many small businesses are exempt from the increase — what will the chamber say then?

Even if this goes nowhere — and it may end up where all other broad-based solutions have in narrow-minded Nevada — you have to love Lanni’s cold dish of revenge served up for the chamber folks. The idea itself has some conceptual support in the gaming industry — although never has that phrase been more of an oxymoron because of personality and ego clashes. Just because it is Lanni’s idea, others on the Strip have recoiled — something the guy who used to own some of Lanni’s properties can relate to. But, sources tell me, Steve Wynn, along with Station Casinos and Boyd Gaming, are interested in Lanni’s idea, even if some will still support the deal with the teachers union that involves only room taxes.

Lanni has framed the deal well, too, because his company is the state’s largest employer and would take quite the hit with this doubling of the payroll tax. Of course it’s nowhere near the impingement on the bottom line that a gross gaming tax increase, which the teachers abandoned, would have caused. But gaming pays with this tax, too, as does business, which chamber lobbyists insisted in 2003 would have to get very, very high before it caused a disincentive to hiring — so let’s hold them to that, too.

Another advantage of the payroll tax is that it already is in law, so lawmakers would not have to take the time to create and vet a new tax. But Lanni perhaps does stretch too much when he suggests that because it is an existing tax, it does not fall under Gov. Jim Gibbons’ no-new-taxes pledge. I doubt the governor’s definition of an increase is quite so narrow.

But even though the doubling of the payroll tax would maintain Nevada’s low-tax ranking of businesses, it is far from a perfect solution. It would actually have a disproportionate impact on gaming, thus increasing the tax system’s reliance on tourism. And it also would let a lot of less labor-intensive businesses making a fortune in the gaming-based Nevada economy off the hook — the main problem with the two-legged tax stool.

So how does Lanni plan to get this into law? There was talk about getting an advisory question on the County Commission’s agenda for next week. It’s highly unlikely — probably impossible — to get such a broad-based solution through the Save the Governor Telethon next week, where the chief executive will claim to be open-minded to solutions as he holds his veto pen behind his back.

Yes, Terry Lanni must be a man who appreciates irony. So here’s another one for him: Whether it is next week or 2009, the man Lanni helped elect governor in 2006 by bundling tens of thousands of dollars to him from MGM Mirage may be the man whose veto kills his tax plan.