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Nevada Casinos Pay No Taxes
by Sen. Joe Neal
Nevada's three-dozen largest casinos should endorse my proposal to modestly increase their taxes. It will cost them nothing and the alternative is far worse.
A federal commission is now taking a hard look at whether the industry is paying its fair share. At a recent New Jersey hearing, federal commissioners were treated to glowing reports of all the community good the thriving industry has done. Atlantic City casinos pay the state eight percent on gross revenues. An additional 1.25 percent goes into a community reinvestment program.
Nevada gamblers actually pay nothing in state taxes. Whatever they give the state, they deduct like any other business expense from federal income tax.
Nevada casinos are subject to the lowest rates in the nation. Our low taxes subsidize industry payment of higher levies in other states. I merely propose that we keep more of the money here at home rather than send it to Washington or New Jersey.
My proposal would not affect small operators. Those grossing less than $50,000 per month currently pay a three percent tax. Casinos generating between $50,000 and $134,000 per month pay four percent. About three dozen major operations gross more than $134,000 monthly and are subject to the top rate of 6-1/4 percent which has not been raised in more than 10 years. Casinos in other states pay as much as 34 percent for the privilege of a gaming license.
Gamblers succeeded in raising taxes on everyone but themselves during the last legislative session. They won a tax loophole to deduct the face value of lucky bucks promotional coupons. This is, in fact, a license to print money and costs the public about $2.5 million yearly.
A more controversial tax break to subsidize casino purchase of expensive works of art will take more than $10 million away from the state in its first year. About 42% of that will penalize support of local schools.
Nevada's largest industry has made us the fastest growing state in the nation but simply does not contribute its fair share to deal with the impacts.
The public pays for the costs of addiction and other gambling-related problems. The federal commission will see this and propose appropriate taxation.
Federal commissioners know that Atlantic City's suicide rate increased after gambling was legalized. A Harvard Medical School study, praised by American Gaming Association President Frank Fahrenkopf, showed more than one percent of the adult population suffering from addictive gambling. The study further showed an increase from .84 percent to 1.29 percent in "disordered" gambling in the past 20 years. The increase was derived from a comparison of 35 studies published between 1977 and 1997.
Even using the most conservative numbers, the social cost is astounding, ranging from $13,200 to $52,000 per victim per year. A University of Michigan analysis projected that five percent of Nevada's population suffers from a gambling problem.
At just the one percent level, Nevada's social cost stands at more than $224 million per year. At five percent, the annual impact tops $1.1 billion.
My minimum increase of two percent for the largest, most profitable operators would divert about $138.4 million per year from federal government coffers to the state treasury.
Linked with that increase, I propose a major tax cut for all businesses by wiping out the per-employee head tax, a major roadblock to job creation, especially for small firms.
As the largest employers, gambling houses would benefit the most from elimination of the per-employee charge.
The conservative Nevada Policy Research Institute recently published a comparison of state tax burdens. Figures from the Tax Foundation of Washington, DC, ranked Nevada sixth in state and local taxes per capita for 1997.
This punctures the myth that we are a low-tax state in which to live. Simply too much of the tax burden rests on the backs of the little people. My proposals are a modest attempt to correct some of this inequity.
Gambling is not our biggest revenue contributor. According to 1996 figures from the Tax Foundation, Nevada ranks among just six states generating more than half of state income from sales taxes.
The sales tax is the ultimate regressive levy. The less you earn, the larger becomes the percentage of your income which goes to government. Only about a quarter of Nevada sales taxes are paid by tourists. The lion's share comes from residents.
Raising the gross gaming tax on the largest Nevada casinos is the best preventive medicine the industry can take. Otherwise, the federal government will come calling and take our fair share to Washington.
You can write to Sen. Neal at
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