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EDITORIAL
Pound foolish
Tools
Updated: Apr. 10, 2012 | 9:53 a.m.
State and local governments are notorious copycats. As soon as one jurisdiction comes up with a meddlesome, money-grabbing plan, the idea spreads like a virus through elected bodies everywhere. Think of new taxes on soft drinks and bottled water or traffic enforcement cameras.
Clark County commissioners are poised to hop on another bandwagon in an attempt to bolster room tax collections. They're so eager to fall in line that they're losing sight of this struggling valley's best interests.
The latest bit of public-sector peer pressure involves online travel agencies such as Orbitz and Expedia. Travel Web sites heavily promote Las Vegas and are instrumental in keeping Strip occupancy rates well above national averages, even in this recession. The businesses pay taxes on their huge room buys, but on the wholesale prices they pay to hotels, not the prices they charge customers.
The fact that these Web sites profit from the practice bothers tax-hungry politicians, who think they're entitled to the biggest cut possible. So a handful of cities and states have sued the online travel companies for what they claim are unpaid taxes -- and some of them are winning. In February, Anaheim, Calif., won $21.3 million, and last week, San Antonio won a $20.6 million award.
Even though state tax officials issued an opinion in 2005 that these Web-based outfits are not doing anything wrong, lawyers are whispering to cash-strapped commissioners that the lawsuit lottery is ripe for a payout. One attorney estimates that the state, county, the school district and the Las Vegas Convention and Visitors Authority could split between $200 million and $500 million in uncollected taxes (less attorney fees, of course).
"I don't know why anyone should feel uncomfortable with it," said Commissioner Chris Giunchigliani, who is bringing the matter before the board next week.
How about this: If the commission successfully extracts hundreds of millions of dollars from these companies, they'll have hundreds of millions of dollars less to buy Las Vegas hotel rooms. Government's short-term gain could be the economy's loss, replete with lower visitor volume, lower tax collections and more local layoffs.
"That's stepping over dollars to pick up pennies," said Chuck Bowling, MGM Mirage's vice president of marketing. "These companies are helping us to drive tourism ... in a way that we couldn't otherwise. We need all the faucets on."
Exactly. The commission needs to stop thinking about its own budget problems, which pale in comparison to those of the state's dominant industry. Suing primary drivers of tourist traffic will only make things worse for everyone.
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S. Summerlin,
I'm not saying that these companies broke any laws; I don't know if they did or they didn't. I don't know what Nevada state law says on the issue.
I'm saying that if they did break the law they should pay the taxes they owe. If they didn't then they should be left alone.
The editors, however, are saying these companies should be left alone even if they did break the law. If the editors wanted to argue that the law should be clarified so that these companies would pay a lower tax rate they'd have a case, but they're saying these companies should pay lower taxes regardless of what the law says.
They would never win a dime against Priceline.
Shatner would come out and smack them down.
John
Say you are a wholesaler who got a great deal on widgets. You paid the widget tax based upon the price you negotiated. Now in order to give your employees a bonus you sell the widgets at your normal asking price because these are the hot new widgets, keeping the additional profit for yourself. Do you pay back to the government the additional tax on the profit you made by getting a great deal on the widgets?
I don't think so. They paid the taxes on the price they bought the rooms. At best if the County thieves could justify it, they should only collect taxes on the difference between the purchase price (by the wholesaler) and the price paid by the consumer.
Hey, great idea! Another consumption-based tax when NO ONE is consuming anything!