Saturday, Dec. 26, 2020 | 2 a.m.
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Empty stages. Spotlights collecting dust. The fate of live entertainment in Las Vegas, one of the city’s most prominent industries, is yet again a high wire act.
The return to showbiz has one short-term solution, which is a decrease in the amount of local positive COVID-19 cases through dissemination of multiple vaccines; a long-term solution lies within the live entertainment tax (LET).
The LET in Nevada is a 9% admission charge on an event of over 200 people, where both the entertainer and audience are in physical attendance. Collected revenue is paid entirely to the state general fund, where the money is distributed primarily to the Department of Education and the Department of Health and Human Services for each of the state’s 17 counties. With the current tax structure, Clark County receives an unequal amount of LET revenue. The Las Vegas Convention and Visitors Authority found that Clark County generates 97% of LET revenue — yet none of it is specifically retained here. Rather, each county receives a portion of the LET through the general fund, even though Clark County contributes the most.
For reference, compare the LET to mining taxes in Nevada. Mining taxes operate under a “carve-out” tax structure. In most instances, the revenue generated from mining is equally split: 50% is retained in the county where that revenue was generated, and 50% goes toward the Nevada general fund. With the LET, 97% of the revenue is generated in Clark County but 100% of it funnels into the general fund. Available general fund budgets do not list out how much LET revenue each county receives; however, it is clear that there is no direct LET revenue allocation to Clark County.
This imbalance must be resolved. Think of these taxes as dividing up a pizza. Under the mining “carve-out” tax structure, the person who brings the pizza — say, Elko County — will keep half of it but offer the other half to everyone else. That person will continue to bring pizza because they are satisfied with the portion they receive. Under the LET structure, the pizza is divided evenly and the person who brought the pizza — by and large Clark County — is left with a significantly smaller share. This person might not bring pizza every time since they do not receive an adequate share of the pizza. Returning to reality, if Clark County were to receive as much LET revenue as Elko County receives mining tax revenue, everyone would be better off.The absence of “carved-out” LET revenue is a missed opportunity because the state depends on the Southern Nevada tourism industry, yet Clark County does not receive respective funding from the LET.
Capacity limitations and social distancing regulations have been detrimental to live entertainment. Recently MGM Resorts International stopped production of all of its shows, and Caesars Palace halted its trademark show, “Absinthe.” Gov. Steve Sisolak’s continuation of the “statewide pause” forces venues to operate at 25% capacity or a 50-person limit, whichever is less; these binding restrictions will be re-evaluated in mid-January. This year, with nearly no live entertainment, the general fund should expect to see minimal LET revenue.
In a time of darkness, the spotlight shines on a proposed reallocation of LET revenue.
The 2021 legislative session provides the perfect opportunity to construct a live entertainment “carve-out” tax, similar to the mining industry. Since the general fund is not expecting much LET revenue anyway, 2021 is an opportune time to create a live entertainment “carve-out” tax and measure its economic effects for Clark County and the entire state.
Two key reasons demonstrate why a live entertainment “carve-out” tax should be considered: There is precedent with mining taxes, and a stronger tourism industry benefits the entire state. First, the “carve-out” mining tax structure already exists and proves to be effective. Rural counties depend on mining tax revenue to maintain mining operations. Often, mining tax revenues make up most of the county’s overall budgets, demonstrating the value of a “carve-out” tax. It reinvests revenue generated from that industry with specific purpose; Clark County could use additional LET revenue to bolster the tourism sector, specifically toward live entertainment. Second, the entire state is dependent upon strong Southern Nevada tourism. Headlining performers and spectacular shows are some of the best competitive advantages Las Vegas has over other tourist destinations — it is necessary to keep live entertainment alive. The proposed live entertainment “carve-out” tax revenue could provide additional funding to attract tourists and promote the resurgence of Las Vegas showbiz.
Nevada is at the confluence of economic and health policy. Emerging from a shambled economy, the whole state will initially rely on visitors coming back to Las Vegas. The 2021 legislative session is an optimal time to support Las Vegas tourism through a live entertainment “carve-out” tax.
Now is the curtain call for Nevada legislators and it is their duty to make an imperative change to the LET in an effort to sustain the entire state.
Katie Gilbertson is a student researcher for Brookings Mountain West and the Lincy Institute at UNLV.
