EDITORIAL: 'Stabilizing' the tax base - Opinion

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Nov. 09, 2008
Copyright © Las Vegas Review-Journal

EDITORIAL: 'Stabilizing' the tax base

Another study highlights the false assumptions

The buzzword du jour among the Democratic majority in Nevada's Legislature is "stability." The state wouldn't have such a dramatic budget shortfall -- $1.2 billion in spending has been offset already, with an additional $250 million in cuts to come -- if the government's revenue structure weren't so volatile, they argue.

With some major fixes, the electorate has been assured, Nevada can have soothing predictability in tax collections, a flow of money that doesn't nosedive when the economy does. Such revenue "stability" can end Nevada's "boom-bust cycle," Assembly Speaker Barbara Buckley, D-Las Vegas, has said throughout the 2008 campaign and in town hall meetings on the state's budget crisis.

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The findings of a Las Vegas Chamber of Commerce study released Friday run counter to that argument. According to the report, Nevada has the ninth most stable tax structure in the nation. The study also determined that the state's per-capita tax collections rank 27th nationally.

"The results of this analysis suggest that Nevada's state tax system does not sit at either end of the spectrum," the report said. "It is neither among the nation's most stable systems, nor is it among its most volatile."

In fact, the report points out, the state's business-friendly tax structure, which levies no personal or corporate income taxes and no estate tax, has served Nevada remarkably well over the past few decades. Over a 20-year period ending last year, the state had the country's top population growth rate and top job creation rate, as well as the nation's fastest-growing state government budget.

"The reality is that every state's tax system is a function of consumption, productivity and/or wealth," the report states. "When the economy suffers broadly, as is the case in the vast majority of states today, there is no tax system in the nation that is immune to its effects."

Indeed, no state is facing deeper budget challenges than neighboring California. The Golden State has most every tax imaginable, yet Gov. Arnold Schwarzenegger this week proposed raising the state sales tax 11/2 cents, creating new taxes on alcoholic drinks and oil extraction, taxing services such as vehicle repairs and veterinary services and sports and amusement park tickets, as well as boosting vehicle registration taxes. And he still has to cut the state budget by billions of dollars on top of that. Is this the kind of "stability" Nevada wants?

Those unhappy with Nevada's tax structure imply that residents can afford to pay more taxes because so much of the state's revenue comes from gaming levies and sales taxes paid by tourists. But such reasoning acknowledges that -- in normal economic conditions -- the state has plenty of money. Taking Nevada's budget even higher means giving it farther to fall.

When the Legislature convenes in February, lawmakers would be wise to keep handy the Chamber of Commerce's study, along with a study commissioned by the Nevada Development Authority, which found that adding new taxes to the current mix won't have much effect on the stability of the state's tax system.

The 2009 session's focus on "stability" mustn't morph into a movement for destructive tax increases.

When the economy recovers, the state government's bottom line will bounce back, too.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. twin patricks wrote on November 09, 2008 06:46 PM: Patrick wrote on November 07, 2008 09:39 AM: Yes Mike that is correct. The reason is because corporate income taxes are the most volitile tax of all. Nevada has property, sales, gaming taxes as well as a state payroll tax (which is a really bad one and should be repealed). Not one state has a system based on property taxes alone. Arizona has higher property taxes than Nevada, I believe, no gaming taxes, and it is in worse shape than Nevada. kelly wrote on November 09, 2008 06:39 PM: tight not addressed in nevad and other state statutes? why, there would be no reason to "payout" would there. Nevada has a 75% minimum payout; NJ has a 78% payout....payout software can't be chaged without approval of gaming control board; slot machines are audited by government regulators.... more statute reading seems in order Sad Summerlin wrote on November 09, 2008 04:34 PM: patrick --- the typing it slow was a bit of humor... not angry... just interested in your explanation... As to your response to "Inclined"... in general, slot machines outside of Las Vegas hold more than Vegas properties. Will you find games that hold less... yes. Will you find games that hold more yes... If my comment came as an absolute, then that was wrongly implied on my part. The margins on table games can be adjusted based on what is offered (i.e. Dealer hits soft 17 etc)... but that is the point... Simplifying the math... if a casino in Vegas and a casino in high-tax state both make 10% hold on a machine... for $100 played... both casinos WIN $10. If my math is correct... NV gets .70 cents and High Tax gets $5. In order to attract people to come to Vegas rather than the stay local (i.e. the tourist has to pay for plane tickets and accommodations), Las Vegas will provide more comps or incentives... so that $10 win is offset by $3-4 of comps for example... Raising the tax about 7% would force properties to reduce their comps and therefore people might make the decision that staying in their own back yard to gamble is a better option than flying to Vegas... And that's math for games that are equal... By the way... I am a he and my name is Steve. patrick wrote on November 09, 2008 03:46 PM: Inclined to Disbelieve: See, this is what happened; sad said: "Have you played in Casinos outside of Las Vegas? They are quite a bit "tighter" to use common terminology. The profit margins in Las Vegas are far lower than the margins that in the regional casinos." Got that? She made an unsupported statement, and I challenged her to prove it, which of course will be impossible since clearly she is using her own anecdotal experience to make a general statement about casinos across the country. But as an aside, I read statutes for a living and yes I have examined casino laws in some...they don't generally speak of how "tight" machines have to be, this is up to the gaming companies. patrick wrote on November 09, 2008 03:43 PM: Jim: It was not me that you were addressing, and I did not say anything about eliminating the employee tax; must have been a different "Patrick", I don't capitalize my name. So...there you go. Inclined to Disbleieve wrote on November 09, 2008 03:31 PM: Patrick tells us that "Its impossible, and you certainly will be unable to show, that EVERY location outside Las Vegas "tightens" their machines""" Patrick, have you read the statutes of all the various states? patrick wrote on November 09, 2008 03:25 PM: sad: You seem to be angry and I can't understand why. Have I offended you, or implied that YOU were slow? In response I will tell you that ALL table games, where ever located have THE SAME odds as in Las Vegas (there are small "take" differences in blackjack depending on the number of decks used, or the rules for hitting, but these are not widespread even in Vegas so you can disregard these as it relates to the overall "take") Its impossible, and you certainly will be unable to show, that EVERY location outside Las Vegas "tightens" their machines (which are all that is left other than table games) in the same way; some are tighter some are not. sad, other markets are less competitive than Vegas all ready, there are factors unrelated to the "tightness" or "looseness" of the machines which weigh in a jurisdictions ability to take more from their "customers"; geographic reasons, income among their customers are only two. The point is that clearly other jurisdictions have SIGNIFICANTLY higher taxes on their casinos and STILL have casinos FIGHTING for the opportunity to build. It is disingenuous to argue that Nevada casinos are simply UNABLE to pay more in taxes, particularly in light of the constant allegation that businesses simply pass their tax burden on to their customers. Its just dumb. And by the way, while I DID NOT respond to your personal attacks on me this time, my patience is not unlimited, and I will respond with similarly useless attacks on you in the future should you continue to attack me. Sad Summerlin wrote on November 09, 2008 02:47 PM: patrick... again... I am guessing you didn't see this response at the end of the week or it was too complicated.. so I will re-type it slowly so you can understand it... Have you played in Casinos outside of Las Vegas? They are quite a bit "tighter" to use common terminology. The profit margins in Las Vegas are far lower than the margins that in the regional casinos. This is quite often due to the repressive tax rates in the regional locations. But that doesn't stop business expansion... corporations want to grow and expand and they will compete for these new areas since there will be a significant less amount of competition... People come to Vegas because the slots are "looser", they can get more "Comps", they can enjoy the environment... Raising taxes here will only make Las Vegas less competitive to the other States... Now why do you think Missouri and Colorado repealed some of their repressive gaming laws? To be more competitive... And while regional markets are growing and expanding and becoming more competitive to Las Vegas... simple minds like you want to raise taxes... and stifle competition... jim wrote on November 09, 2008 02:42 PM: patrick, i don't know if you have a problem with short term memory or not, but just yesterday you said that nevada should eliminate the employee tax for nevada businesses. you said it was a 'bad' tax. i only challange you, as i did yesterday, to go through the budget [i even provided a link at 11:20] and identify the line items that will attain an expenditure reduction equal to the MBT revenue stream of $280,386,000 [my short term memory itself was waaay off when i said $38m]. so, are you all talk about that $280 cut or what? i note the governor and legislature are looking at cutting $300,000,000 before year end, so please identify $580,386,000 in cuts to the state budget. you sound like a guy who cares and wants to help point out what is wrong, so please add your inestimatable intelliect to addressinhg the problem and come back with an answer, not some lame retort. patrick wrote on November 09, 2008 01:48 PM: Jim: I don't know which part of my post you didn't understand buy I will be happy to repeat it: casinos FIGHT (read spend MILLIONS lobbying) for the CHANCE to open casinos in jurisdictions THAT WILL TAX THEIR INCOME AT 50%, but they turn around and FIGHT (read spend MILLIONS) against proposals in Nevada that their tax rates be increased to 7%. Then some NEVADANS will support their efforts claiming that somehow it will ruin the casino industry to pay ANY more. Its ridiculous. Did you get that Jim? Read All Comments