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Seems Like Old Times

Casinos, NSEA Target
Nevada Business

by Steven Miller

n a secluded Nevada mountain canyon, Rip Van Winkle wakes from a 10-year snooze. He yawns, getting to his feet as he brushes off the cobwebs. Then he saunters down the ravine and out to a highway.

At the side of the road -- blown out of a passing car -- is this morning's newspaper. Rip glances down and reads, "Teacher union vows push for corporate income tax," and "Gamers back business tax."

Confidently, he kicks the paper aside and walks on. "Read that yesterday," he muses to himself.

Rip Van Winkle may have a problem finding out what year it is, but the evidence is overwhelming that he's not alone. Some of Nevada's would-be political masters are demonstrating they're stuck in a Groundhog Day loop -- and they're not learning anything.

Ten years ago the Nevada State Education Association (NSEA) -- the teacher union -- and the Nevada Resort Association (NRA) -- the casino owners -- began beating the drums for a broad-based tax on all Nevada businesses. Two years later, during the 1991 Legislature, they achieved their goal: What was then called a $25-per-employee quarterly tax on Nevada businesses(1) was signed into law by Governor Bob Miller.

Today, the NSEA and the NRA have dusted off those same old drums and again they're marching up and down that same old street.

Once again they've got plans to use the political process for their own financial gain. Just like 10 years ago, the union bosses want a statewide corporate-income tax established so they can channel even more education-earmarked revenues into their power base. The gamers also have the same goal they had in 1989. Polls show that Nevadans, by an 80 percent margin, now favor a hike in the state's gaming tax -- currently at 6.25 percent for its top rate. NRA strategists hope to deflect that oncoming juggernaut. If the rest of Nevada's business community can quickly be soaked with a corporate-income tax, they figure, the NSEA's insatiable appetite for always-higher taxes will be slaked for the moment and casino taxes won't be raised any time soon.(2)

But the NSEA and NRA agree that success doesn't even require that an income tax borne by non-gaming businesses become law. They think that, even if ultimately unsuccessful, a statewide initiative campaign in pursuit of such a tax is still likely to result in some kind of increase in taxes on business. After all, that's what happened 10 years ago.

It was then that the NSEA, supported by the Nevada Resort Association, conducted a successful petition drive to put a 10 percent corporate income tax measure on the 1990 ballot. But that wasn't the only front in the overall campaign. The teacher union's confederates in the casino industry were, at the same time, using their influence in important state business organizations to undermine any effective counter-activity by business people opposed to the tax.

Not until 1991 -- a full two years after the Nevada Resort Association had publicly announced its "aggressive support" for a broad-based business tax -- did effective business opposition to the tax finally break free from the smothering control being exercised by the gaming industry. But by then it was too late.

The new opposition to the tax would eventually coalesce into the Nevada Association of Independent Businesses (NAIB). Its initial spark, says one witness from that time, came out of the Las Vegas Chamber of Commerce.

"Part of the business committee at the chamber felt that a large percentage of the membership were against [the tax] but the powers-that-be over there" were not reflecting those feelings, the source told Nevada Journal.

Phil Stout, now executive director for the NAIB, agrees.

"What happened," he says, "was that there was very little opposition to the 10 percent corporation tax ... until NAIB came up. They were the people who got together and started NAIB to fight that."

But that organized opposition, he says, didn't really take off until about mid-February of 1991.

Stout, at the time an assemblyman, says "We fought it all the way to the end of the Legislature.

"[We] kept appearing and being against it, but by this time the coalition to have the taxes started becoming the Las Vegas Chamber of Commerce, the Nevada Resort Association, the Nevada Federation of Independent Businesses."

According to the legislative history for AB 303 -- the bill that became the business-employee tax -- the rout of the business community was virtually complete. Following the lead of Nevada Resort Association lobbyist Harvey Whittemore, eventually supporting the tax were Carole Vilardo, Nevada Taxpayers Association; Irene Porter, Nevada Homebuilders Association, and Mary F. Santina, Nevada Retail Association. Other business witnesses testifying for imposition of some broad-based tax on business included Sam McMullen, lobbyist for the Nevada Mining Association, and Jim Wadhams, for Newmont Mining.

Even representatives from the Nevada Development Authority (NDA) and the Economic Development Authority of Western Nevada (EDAWN) -- state-supported organizations formed for the express purpose of bringing new businesses to Nevada -- dutifully trooped to tax committee microphones and pledged undying ardor for the tax that could only hurt efforts to diversify Nevada's economy.

The Same Suspects -- Plus Others

Many of the business-community supporters of the tax were no real surprise. Whittemore and McMullen were and are longtime Democrats, usually rallying to any cause dear to the NSEA, perhaps the most powerful special interest in their party. Denny Weddle, from the NDA, and Pat Coward, from EDAWN, were political creatures confronted with a politically potent casino industry and its tax-desiring governor.

But other businessmen in retrospect look simply na´ve. They thought that "cutting a deal," or "splitting the difference" with the teacher union/casino industry coalition would end the problem.

"All these business organizations now had decided to go and support some type of business tax," recalls Phil Stout, "and their argument was that we didn't want to have the corporation tax."

The "split the difference" crowd of businessmen was pinning its hopes on a back-room deal made with the teacher union, a deal reportedly put together by Nevada Resort Association lobbyist Whittemore. Rather than go to the mat with a full-scale, election-season contest before Nevada voters, the NSEA said it would drop support for the Proposition 6 corporate income tax measure it had put on the November 1990 ballot. In exchange, all the businesses had to do was back passage of some new broad-based business tax during the upcoming legislature.

The union's state director eventually referred to the deal on the record in the legislature, according to minutes of a June 19,1991 Assembly taxation committee meeting:

"Mr. [John] Cummings stated NSEA had withdrawn its support of Question 6 during the last general election in the interest of harmony, and to eliminate corporation and education bashing." Cummings noted that the union had supported Governor Bob Miller's erstwhile proposal for a "business activity" tax, but now he "strongly urged passage" of the tax on Nevada jobs.

What came out of the deal, says Stout, "was a $324-25 million tax increase, which was the business tax."

But another legacy of that deal -- as in any other extortion case -- was the increased likelihood of being shaken down again.

Now that the NSEA has announced plans to circulate petitions to put a 5 percent corporate-income tax on the ballot, Stout says "It does seem like it's laying out this same type of scenario."

He adds he's concerned that Nevada businesses could end up "in the same boat" as 10 years ago.

Though the Las Vegas and Reno chambers of commerce and the Nevada Taxpayers Association have announced plans to try to nip the corporation-tax proposal in the bud, Stout asks, "At what price?" The past role of the Vegas chamber and the Nevada Taxpayers Association -- both with powerful casino interests on their boards -- does not inspire confidence, he suggests.

"That's the thing," he says. "Are they secretly -- somebody, some group apart from this coalition -- going to sit down with the teachers and tell them that 'We'll certainly try to get you more money...'? That's what I don't want to see happen."

Today, as 10 years ago, the large-casino interests that dominate the Nevada Resort Association define their own welfare in conspicuous opposition to that of the general Nevada business community. For the state's conventional business organizations -- dominated as they are by their large-casino members -- this is an embarrassing reality they normally prefer to ignore. But it's a reality increasingly hard to evade, given the casinos' repeated campaigns for the raising of taxes on other businesses in the state.

Examples of the latter are the 1989 hike in the state mining tax, multiple campaigns for hikes in the sales tax, and over a decade of lobbying and public support for so-called "broad-based" business taxes that exclude casinos. And there are several credible reports that major NRA casinos are currently maneuvering behind the scenes in support of the teacher union's efforts to tap into the bloodstream of non-casino businesses.

Monkey on Your Back

Why do the casinos perceive such an substantial divergence of interest? Certainly it has to stem from a recognition over the last two decades that 1) Nevada taxes are always going up, and 2) gambling is easily the most politically popular beast of burden for any new taxes. Faced with the casinos' objective vulnerability, their strategists have chosen to move proactively -- and put the monkey on someone else's back.

"It's perception," explained one long-time political observer. "The teacher union knows that they can go out and just accuse everybody in the world of hating kids.

"Gaming doesn't want that. They know that if you took it to a ballot question, gaming would get hammered [by] 5, 10 percent. Whereas by voluntarily stepping out there and 'leading the way' [they can look good]."

It is quite revealing that, faced with the state's always-insatiable lust for higher taxes, the gamers have -- time after time -- chosen not to address that basic problem. Rather, they've opted to prostrate themselves before the biggest source of the problem -- the Nevada State Education Association.

The decision suggests the mindset that still reigns in many of the resort industry's management suites -- beneath $900 Armani shirts and leaked-to-the-press "anonymous" purchases of multi-million-dollar Impressionist paintings -- is still the old unspoken carnival-and-wise-guy- bred conviction of social illegitimacy.

Consider: Because the NSEA has long shown itself the state's pre-eminent foe of good schooling for Nevada kids -- fighting academic standards, merit pay, vouchers, charter schools and all kinds of other reforms -- no amount of new money is going to address the basic problem. But rather than take a forthright stand on the realities of Nevada education and in behalf of Nevada kids, the casino moguls cower before union threats of demonization and decide their most practical course is to side with the malefactor.

Businessmen often assume such "compromise" is practical. But feeding a monster is rarely smart over the long term, and the historical record of businessmen who learned this to their sorrow is long.

Consider Germany after World War I, when anti-Semitic and anti-free-market propaganda was reaching an exceptionally virulent pitch. Millions of German-Jewish businessmen -- veterans of that war and the Franco-Prussian War before it -- insisted on taking at face value collectivist talk about "sacrifice for the Fatherland" and the "welfare of the Volk." And so, to anyone who would listen, they would hasten to point out all the sacrifices they, too, had made, in blood and coin, for the common Fatherland.

It did no good.

It did no good because what actually was at issue was not whether these individuals had served or made sacrifices for the German state. It was something much uglier, something that most of the businessmen were extremely reluctant to face, since its basic premise was one they had been taught all their lives.

The actual issue was whether any individuals, Jewish or not, had any fundamental right to not serve, sacrifice or be sacrificed for the collectivist whole.

What Really is at Stake

Here in Nevada the underlying issue is increasingly the same. No longer is the main question whether or not the sluggish, failure-addicted government schools really need more money. Nor is it even whether the public schools are ever going to be capable of adequately educating Nevada's children.

Instead, more and more the fundamental question is whether or not Nevada business people -- in the resort industry or not -- today retain any right not to be foodstuff for a voracious and powerful special interest group.

In 1991, Newmont Mining lobbyist Jim Wadhams testified before the state legislature in support of the looming tax on Nevada business employment. When he mentioned meeting with other businesses during the previous year to agree to support new taxes on themselves to fund the next state budget, State Senator Ann O'Connell, according to the minutes, said:

"Jim, what you're telling the committee is that you have gone through the budget, and you have, in your own mind, justified every expenditure of that budget, and you are supporting the additional $330 million worth of taxes."

"I have to say yes," answered Wadhams. "We have to defer to the judgment of the two money committees. We feel, in this deliberative process, that is the fairest way to come to [an] answer. So, I guess what I am saying is that we are satisfied that our elected representatives have done the job."

O'Connell pressed her point, asking whether "if the budget had been at $400 million, or $500 million" Wadhams would still be supporting the taxes.

"I'm afraid my answer to that has to be yes," said lobbyist Wadhams, explaining that he "wholeheartedly" believed in the legislative process.

A bit later, O'Connell put the same questions to the NDA's Denny Weddle and EDAWN's Pat Coward. Both said they also supported imposing the tax because of their "faith" in the legislative process.

O'Connell's response was: "As business people, I think we are in a lot of trouble, then." NJ

Steven Miller (sm@npri.org) is managing editor of Nevada Journal.


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