Vol. 4, No. 24
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October 15, 2007
Nevada's Online State News Journal
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Feature Story:
Analysis
Taxes In Nevada:
Gaming Gets Deal
Sales, Property, Mining
Have The Highest Rates
by Johnny Gunn
The gaming industry in Nevada appears to be in a splendid position for those that own or reap the benefits of the gambling palaces around the Silver State, with a tax rate that is the envy of the industry. The coffers that seem be overflowing are becoming the envy of many groups in Nevada as well, including the teachers' union. The Nevada State Education Association (NSEA) announced that they plan on offering an initiative petition to voters to raise the current tax on gross gaming win in Nevada from 6.75 percent to 9.75 percent. For more on NSEA go to http://www.nsea-nv.org.
NSEA President Lynn Warne said, "There is nothing more important than increasing your (teachers) salary, benefits, and improving your working conditions and our students’ learning conditions." Warne went on to say, "We have chosen to stand to make a difference and we will not quietly submit to the idea that there is nothing we can do.” The initiative says the increased revenue would be "dedicated solely to K-12 public education."
Initial response to the proposal has been positive from the private sector, but response from some politicians and some school district officials has not been favorable. In Washoe County, the school district has been looking to get tax increases in several categories and suggests the move by the teachers union would interfere with that plan. Senate Majority Leader Bill Raggio (R-Washoe) said he doesn't support tax increases by way of the initiative petition process. He also is not in favor of what he calls a single spending purpose tax such as the NSEA initiative offers.
This is a sticking point for many, the idea of an industry specific tax, that is a tax in this case to specifically support K-12 education. Agricultural interests, mining officials, and politicians have all come out against the idea of an "industry specific tax."
Relating taxes on the gross win from the gambling tables and machines does not equate with such things as property tax but it does equate with sales and use taxes. The state minimum sales tax at this time is 6.5 percent collected on items other than fresh food items. Counties have an option of adding to that. For instance, in Washoe County the sales tax collected is 7.375 percent while in Clark County, the tax stands at 7.75 percent. Several counties have not opted for extra money and only collect the 6.5 percent.
Sales are not an option or a privilege; they are by and large a necessity while the gaming industry is a privileged group. In most economic situations a privileged industry usually pays a premium for that privilege. That doesn't seem to be the case in Nevada, which has the lowest tax rate of all the states with legalized gambling. It's because of the success of Nevada's gambling industry that other states allowed legal gambling and collected sizable taxes, sometimes for education, more often for cash strapped local governments.
The gambling taxes in Nevada are split, some going to education, some to the state's general fund, some to local governments, and some to a program for problem gamblers. There are more than 200,000 employees working directly in gaming in Nevada earning well over eight billion dollars annually. Casinos win well over $12 billion and pay just one billion dollars in state gambling taxes over a year's time. In figures just released by the Nevada Gaming Control Board, for the first quarter of the current Fiscal Year (FY), Silver State gambling palaces have paid $182,834,576 in taxes on an income of $2,162,469,702.
In Colorado for example, the tax rate is a maximum of 20 percent on gross gaming revenue. Colorado casinos took in $782.1 million in 2006 and paid $108.4 million in taxes. Their tax money goes to local communities, historic preservation, and the state's general fund. Illinois gamblers on the other hand pay a minimum tax of 20 percent that can graduate to a maximum of 50 percent. Illinois casinos took in $1.9 billion in 2006 and paid $830.24 million in taxes. Those tax dollars go to education and local government.
Something that is often overlooked when discussing gaming outside Nevada's borders is that in many cases we're talking Nevada corporations. Harrah's, Station Casinos, Fitzgerald's, and others run the gambling palaces not just in other states, but in other countries as well. In Macao for instance, gaming taxes are a whopping 36 percent. When Nevada changed the way gambling licenses could be issued from individuals to letting corporations be licensed, gaming expanded broadly across the country and around the world.
When legislation was passed allowing various Indian tribes to offer gaming on their reservations, the tribal leaders were met with corporate officials that said, in essence, we already know the ropes, let us manage your gaming, and in many cases the tribal officials said yes. That's one reason it is ludicrous to believe that Indian gaming is going to overwhelm, say, Reno gaming. It's the same corporations, and they only care about the bottom line.
Bill Harrah may have opened Harrah's in Reno and Lake Tahoe, but the Harrah's Casino in Reno has no direct ties to the community any longer. It is an international gaming corporation with many fishes swimming in many waters. Which immediately leads to the question, why shouldn't Nevada's casinos pay what some would call a fair rate? The NSEA says they believe the increase in taxes they are asking for would bring about $250 million to Nevada's public schools.
Gaming officials believe they are being singled out for a cure to Nevada's education problems. One educator, or at least one person connected to the education system, University Chancellor Jim Rogers has an entirely different take. He is calling for a personal income tax on Nevadans. As can be imagined, he does not have a full bandwagon at this time. However when he spoke, via video tape, to two gatherings recently to outline the higher education system in a yearly statement, he did not bring up the personal income tax question.
Rogers lamented the current educational condition in Nevada, being last or one rung from the bottom in many cases. Children are not prepared for university, often drop out of high school, and the percentages of those that finish four years of college are very low. Rogers, like most in the education field blame a lack of money for the problem and called for higher tuition fees among other ways of pumping money into the program. Rogers' taped program was played to groups in Reno and Las Vegas.
High tech industry is moving into northern Nevada and finding it difficult to find well educated workers. Often, they have had to bring in workers from out of state. At this time, with students not being intellectually prepared for university, many have said the schools only provide minimum wage workers at best. Some point an accusing finger at the gaming industry for forcing the situation and maintaining a stable work force for themselves.
The gaming industry in Nevada may have had some forewarning on the NSEA plans for an initiative petition as they began an extensive advertising program recently touting how much money they contribute to Nevada's education system. Rogers owns television stations in both northern and southern Nevada and has a considerable income from the gaming industry.
Property tax money is a large part of education budgets in Nevada's 17 school districts and when the legislature actually lowered and then capped property taxes during the 2005 Legislative Session, there was a fear that it would impact education more than anything else. A tax abatement appeared on budget rolls and it did impact the amount of money made available to school districts in the various counties.
For instance, in Carson City the school district was projected to receive $17,400,689 for the 2006-07 fiscal year. Following the tax abatement they received $15,015,260. A two million dollar decrease has a definite affect on a budget. In Carson City the property tax rate in 2005-06 was 2.6961 per 100,000 valuation. In 2006-07, that rate, under the new cap became 3.0004. The cap that the legislature enacted is a three percent increase for private property and eight percent for commercial. For the state, the average property tax in 2005-06 was 3.1124 and in 2006-07 it climbed to 3.1471.
The tax structure in Nevada and its various political entities is based on the particular industry as well. Private property has a specific tax cap, commercial property has a specific tax cap, and agriculture taxes are equated entirely differently. Rather than being based on the value of the land involved, the tax structure is based on the production of the farm or ranch, and works on a sliding scale as to how the property is used. An irrigated crop is taxed at one value, rangeland on another, while pasture is yet another. As with any industry, there are also various user fees that come into play.
Agricultural interests got a nice sales tax break from the 2005 legislature, one they had been fighting for, for some time according to Doug Busselman, executive vice president of the Nevada Farm Bureau. Sales tax has been eliminated when purchasing farm and ranch vehicles and equipment. Busselman also pointed out that the agriculture tax is set up in such a way as most farmers and ranchers can stay in business. Land speculators are constantly bombarding the agricultural community to sell the land for development.
Busselman said the tax structure is reduced to a level to keep the farmer in business. If the land is sold for some purpose other than agriculture, the tax reverts to standard commercial property tax, and is retroactive back seven years. Developers are regularly attempting to purchase existing water rights from ranchers and farmers, and as has been pointed out, while the price per acre foot is high, it is a one time source of income where a crop comes in every year on that water.
The Nevada mining industry has been an important source of state and local revenue almost since the earliest days of mining in the state. While we often hear and read that the mining industry gets a free ride, most that say such things only refer to federal tax and land laws. The mining industry in Nevada pays whopping sales taxes on equipment alone, according to Russ Fields of the Nevada Mining Association (NMA). One haul truck can cost low seven figures easily, and where a farmer wouldn't pay sales tax, the mines do.
Along with most of the other taxes businesses pay in Nevada, the mines are charged with a Net Proceeds of Minerals Tax (NPOMT). This tax is unique to the industry and can best be related to a property tax on the minerals extracted. According to an NMA document that was made available to The Nevada Observer by the association, "When Nevada became a state in 1864, the politicians of the day understood that the mines, then by far the biggest economic activity in the state, could not accurately estimate the value of their ore deposits until the mineral were actually extracted. That fact remains true today. Ore deposits vary in size and richness and mineral prices change, in some cases by the minute. The NPOMT is based on the value of the mineral extracted. The value is established by a sale of the mineral. In the case of gold and other commodities for which there is an established worldwide metal exchange that posts the price daily, that establishes the price is used to calculate the sales value."
While there are some allowable deductions, the net is multiplied by up to five percent. All gold mines in the state are taxed at that five percent rate; some mines such as barite or gypsum mines may be taxed at a lower rate, but never less than the county property tax. With Nevada rated as the number one producer of gold in North America, and with gold selling in excess of $740 the ounce, Nevada's mines are contributing a considerable amount to various treasuries. About two thirds of the taxes collected stay within the county of origin with the rest going to the state coffers. Because of mining, one of the richest little counties in the state presently is Eureka County. Each county allocates how the money is to be distributed, to schools, infrastructure, preservation, and other needs.
Regardless of how the numbers play out in voter registration and party politics, it is fair to say that most Nevadans are rather conservative, fiscally. Most tax measures are defeated when brought to the voting booth, many elected representatives run on fiscal questions rather than party philosophies, and money matters are debated vehemently in legislative committees.
That said, the initial response to the NSEA initiative to raise gaming taxes is receiving very favorable comments from the man on the street. As one wag put it, let the touristas pay for our education system. The question that is raised often in Nevada is, is gaming paying its fair share? Many say no, but then back that up with the fact they would not support an industry specific tax such as proposed by the NSEA.
Hopefully this question of tax parity and fairness will get the benefit of an intelligent debate and not be decided on who can spend the most money on inflammatory television commercials. Let the fun begin.
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