Gaming, Unions and Politicians vs. Voters, Taxpayers and Business

The defeat of efforts to repeal the commerce tax shows that Nevada’s political establishment – controlled by Big Gaming and Big Unions – owns not only many officeholders of both political parties but nearly all of state and local government.

Many large corporations and industries in recent decades have decided to join – not fight – the destructive liberalism and predatory agendas of the bi-partisan establishment and the selfish union and other special interests that jointly dominate US politics.

These corporate bosses – mainly big gaming and resorts in Nevada – support politicians and ideas that sensible business people and other taxpayers find abhorrent. They support the policies, programs, spending, taxes and regulation by the political class on one condition: That they won’t have to pay for it or otherwise bear its burdens. We get the bill and other burdens.

Public-employee unions and other net tax consumers want the political establishment to throw ever more money at them via programs that do not educate our children, promote public safety, or serve well other public purposes. Instead of fighting this nonsense, the corporate cronyists promote it and get lauded by tax consumers and the mainstream media along with the corrupt politicians as visionary and virtuous. These corporations fund the political campaigns of both parties’ candidates who peddle this nonsense because they’re protected by a grand political deal.

Here are the specifics for Nevada. Fifty years ago, public-employee unions badly disrupted big gaming’s business on the Las Vegas strip when Nevada legislators prohibited collective bargaining between government and public-employee unions. The strategy worked: Gaming pressured politicians to give the unions what they wanted so normal business could resume. Over time, gaming, the unions and the establishment pols came to an understanding that gaming would support the liberal agendas and help elect those pols, and those tax consumers and pols would protect gaming from having to pay the bill for their agendas.

About 15 years ago, they found the ideal mechanism for their purposes: the gross receipts tax (GRT). Since gaming pays taxes on its hold (win), it would not be subjected to a GRT. But nearly everybody else would pay it. They didn’t care that GRTs are very destructive to most businesses, which operate on thin profit margins – which has caused other states to abandon GRTs they used to charge.

Although some legislators (including Ron) stopped the original GRT proposal in 2003, gaming tax revenues inched up less than one percent from 2005 to 2015 while all other state taxes rose 40 percent! And state spending, driven by health and human services and K12 education, soared 59 percent – even before the blowout added last year by Gov. Brian Sandoval and the tax-and-spend legislators.

With the tax consumers and establishment politicians planning to spend even more in coming years, it became essential to gaming to pass a GRT so that it would not pay for future spending increases. So, the teachers union put the margins tax (a GRT) on the ballot in 2014. But voters defeated it four-to-one!

To keep the grand political deal going between gaming, net tax consumers and the political establishment, Sandoval, gaming and the tax consumers proposed another GRT in the last legislative session. Facing resistance by voters and some newly elected Assembly members, at the last minute they withdrew it and substituted the commerce tax. The commerce tax is a GRT they could pass because it was structured to start with a very small initial tax yield and grow hugely in coming years, badly burdening Nevada businesses except gaming/resorts and mining.

Further, the burden from affected Nevada businesses would be passed along to Nevada residents, while the huge out-of-state clientele of gaming and resorts would not pay anything because the industry will pay almost none of the commerce tax.

Voters and businesses around the state rose up in protest, and Ron led the effort for a referendum on the commerce tax. Lawyers for gaming/resorts, unions and the establishment threw many roadblocks in the way, but lost on every point in court. So, they appealed to the state supreme court. Being loyal members of the establishment, the justices manufactured a bogus excuse to upset the referendum effort. That’s the subject of our next column.

Ron Knecht is Nevada State Controller. Geoffrey Lawrence is Assistant Controller.