A trade association representing Nevada’s major casinos is suing to disqualify a ballot initiative backed by a teachers’ union that would raise the state’s gaming tax by more than 40 percent.
The Nevada Resort Association filed the action in state court in the capital of Carson City with the aim of blocking the Clark County Education Association from bringing the proposed tax hike before the state’s voters.
The teachers want the tax on gaming revenues increased from 6.75 percent to 9.75 percent to generate an estimated $650 million over two years for the state’s sorely underfunded public schools.
The union is also backing an initiative to raise the sales tax as part of the funding drive.
The NRA’s challenge is based on its claim that the initiative gives the wrong date for the new law would take effect and doesn’t explain that the money will go into the state general fund even though it’s being promoted as a fix for schools.
“Whether the proposed ‘Description of Effect’ is misleading because of intentional concealment or oversight, this court, through its jurisdiction, is ultimately charged with safeguarding the citizens’ right to be provided with an accurate account of a proposed measure,” the suit says.
If the measure is approved, either by the legislature or by voters, it would create a new top tier to the state’s gaming tax, placing a levy of 9.75 percent on all operations with a monthly gross revenue of more than $250,000.
Currently, the three-tiered tax tops out at 6.75 percent on monthly gross revenue over $134,000 and descends from there to 4.5 percent on win between $50,000 and $134,000 and 3.5 percent for operations that gross less than $50,000.
It is one of two ballot initiatives submitted last month by the CCEA. The second would raise a component of the state sales tax dedicated to school funding from 2.6 percent to 4.1 percent, potentially raising $1 billion annually.
Getting the increases into law via statutory initiative will require signatures from at least 10 percent of registered voters who cast a ballot in the previous election. For the 2020 election cycle, that means a minimum of 97,598 valid signatures total. At least 24,400 signatures in each of the state’s four congressional districts must be submitted by November 18 of this year.
If this happens the initiative moves to the 2021 Legislature, where lawmakers have 40 days to approve it. If they reject it or take no action it would then move to the 2022 ballot.
Matt Griffin, an attorney representing the Nevada Resort Association, said the measure’s intent to have the tax increase take effect on January 1, 2023, is in conflict with the Nevada Constitution, which says a voter-approved initiative takes effect only after the state Supreme Court completes a canvass of votes.
He said that process would likely take more than a month, which is significant because the higher tax would be assessed monthly, and so this would “mislead the gaming properties and the state about when the tax will be imposed.”
He also argued that since gaming taxes go into the general fund and not directly into the education-focused Distributive School Account, the initiative’s failure to explain this constitutes a “fatal omission.”
“It is important that voters understand that despite CCEA’s representations, the Legislature would have no duty to use any of this money for education,” he said in the filing. “The Legislature would be free to spend it on state employee salaries, construction of state buildings, or anything else.”
CCEA Executive Director John Vellardita responded by saying the trade group was “grasping at straws” and that the union expected some sort of legal challenge to be filed against the petition.
“There’s a lot at stake for them,” he said. “We know where the public is on the issue. We’re confident this is going to be on the ballot in 2022.”
Attempts to raise the gaming tax have been a non-starter in Nevada for years in the face of the casino industry’s vehement opposition to singling out a single industry over the option of pursuing more broad-based taxes.
“By targeting Nevada’s economic engine with a 44 percent tax increase, this proposal would be very damaging to the state’s economy, job creation, capital investment and future economic development,” the NRA said last month.
“Broad-based taxes are a sound and stable approach rather than the volatility that comes with taxing a single industry. We look forward to working with the governor, legislative leaders and other stakeholders to improve education.”
