The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:05 p.m., on Tuesday, March 9, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mike McGinness, Chairman

Senator Dean A. Rhoads, Vice Chairman

Senator Randolph J. Townsend

Senator Ann O’Connell

Senator Joseph M. Neal Jr.

Senator Bob Coffin

Senator Michael Schneider

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Chairman McGinness opened the hearing on S.B. 88.

SENATE BILL 88: Increases state license fee on gaming. (BDR 41-76)

Senator Neal asked Russell Guindon, Senior Research Analyst, State Gaming Control Board, to provide information on the tax formula used to tax gaming properties. Mr. Guindon said under the current tax structure of the Nevada Revised Statutes (NRS) 463.370, nonrestricted licensees are required to pay a monthly gaming revenue tax of 3 percent on the first $50,000; 4 percent on the next $84,000; and 6 1/4 percent of revenues exceeding $134,000 per month.

Senator Neal clarified a casino making $50,000, would pay 3 percent or $1,500; the next $84,000 at 4 percent would be $3,360. He said $1,500 and $3,360 added together total $4,860 in tax for the two categories. Mr. Guindon agreed that was the maximum you could pay by adding the first two thresholds together. Senator Neal said if a casino consistently exceeded $134,000 in gaming revenue, they would have an advantage with the formula because the whole $134,000 at 4 percent would be $5,360. Senator Neal asked Mr. Guindon if casinos holding nonrestricted licenses, with $1 million per month in revenue, could save money under the current tax structure. Mr. Guindon said it was difficult to answer the question because, depending on revenues, taxes were paid according to the tax code. Senator Neal asked Mr. Guindon to acknowledge the formula favored larger casinos. Mr. Guindon said he could not answer because the tax code formula is what it is and taxes are paid according to the formula in the current tax code. He added whether it favors one property or another was not the way he viewed the tax code. Senator Neal said $134,000 at 4 percent is $5,360; 3 percent and 4 percent totals $4,860 or a difference of about $500. He said in summary, the current tax structure favors the larger casinos. Mr. Guindon said he could not support that claim because it depended on the revenues.

Senator Neal asked how many properties would be affected by the passage of S.B. 88. Mr. Guindon said based on the reporting revenues for FY 1998, there were 107 casinos that averaged $1 million in gaming revenue per month. Senator Neal asked how much additional revenue would be generated with passage of S.B. 88. Mr. Guindon answered the State Gaming Control Board estimated approximately $113 million per fiscal year would be generated, based on the taxable gaming revenues reported by nonrestricted licensees, for the FY98 reporting period. Senator Neal asked if taxes generated by the formula could be used as a write-off against federal income tax for those casinos. Mr. Guindon answered under the current federal tax law, it would be considered a business expense and would be deductible from the federal taxes.

Senator Neal noted the taxes generated by S.B. 88 would require a change in the current tax law. He referred to (Exhibit C.). He said according to Exhibit C, page 3, the first categories would remain the same, but $134,000 to $1 million would be 6 1/4 percent and $1 million and above (per month) would be taxed at 8 1/4 percent. He noted that would bring in approximately $113 million per year or $226 million for the biennium. Senator Neal said the last time there was a tax increase for gaming was in 1987. He called attention to Exhibit C, page 5, Population Estimates and Forecasts for Nevada; page 6, Nevada Public Schools Enrollment from 1987 to 1999; pages 7 and 8, Bond Issues Approved in Washoe and Clark Counties. Senator Neal noted the bond issues did not include other taxes such as the head tax, insurance premium taxes and many other taxes relating to gasoline and sales taxes which went to cover periods with no increase in gaming taxes. He emphasized gaming was not paying their fair share and in order to meet the service needs, bond issues were approved by a vote of the people. The Senator continued Exhibit C, page 9, Nevada Visitor Volume from 1987 to 1999, demonstrated visitors have continued to come to Las Vegas in increasing numbers. Senator Neal reviewed Exhibit C, page by page. He called attention to the gaming tax information from other states, where as much as 20 percent of the daily adjusted gross revenue was taxed. He said it was important to look at all of these figures.

Judy Calder Ph.D., Director, Center for Applied Research, University of Nevada, Reno, testified the center worked in conjunction with the Cannon Center for Survey Research to conduct random telephone surveys biennially to coincide with the biennial sessions of the Legislature. She referred to Exhibit D, Surveys Conducted by the Center for Applied Research, University of Nevada, Reno, stating this was a highly accurate poll where one can calculate the known probability of the selection of respondents. Dr. Calder commented an important point was that gaming tax increases were ranked No. 1 or No. 2 repeatedly, with very little variability. She noted it was very clear that if Nevadans were to pick a tax source, they would pick a gaming tax increase. She commented taxes that affect our own pocketbooks such as the sales tax on groceries, gasoline or property tax, are least favored taxes. Dr. Calder also presented Public Opinion in Nevada: Selected Legislative Issues, (Exhibit E. Original is on file in the Research Library.).

Senator Neal referred to the 1999 European Casino Report (Exhibit C, pages 17-37). He said gaming was a long-time enterprise in Europe and this report provided detailed information about the number of casinos, tax rates, total gross gaming revenue, values for slots and table games, permitted games, and a digest of the relevant laws and regulations for European countries. He noted only Nevada allowed its casinos to pay less than any other jurisdiction with gaming. He said until recently, studies had not been done on gaming addiction. Senator Neal emphasized when the National Gambling Impact Study Commission was formed and studies were compiled on gaming, studies indicated gaming was responsible for up to 10 percent or more of gaming addiction. Senator Neal said unless gaming paid its fair share, everyone would suffer the consequences. He noted Nevadans were concerned about gaming’s tremendous amount of power and control. He said gaming needs to be taxed sufficiently to pay for the problems that it creates.

Senator Neal acknowledged people have said they are willing to support an initiative petition to vote to increase gaming taxes in this state and if it happened, he thought the tax should be even higher. He continued the gaming industry can exert its influence to block this bill but the problems will continue to fester in terms of infrastructure needs, of schooling, and of paying for the number of tourists that utilize the services of this state. He stated people had a right to do something to meet the needs. He said in summary, there were shortcomings in the information provided today because the Nevada law contained certain restrictions that denied information even to legislators and to the public.

Senator Neal commented from 1987 to 1999 casinos made a tremendous amount of money. He testified some say Native American gaming has affected us, but stock is going up in spite of the threat of Native American gaming. He said S.B. 88 is aimed towards creating money for education and if this bill passes, an amendment would be written to earmark these funds for education.

James F. Mulhall Jr., Lobbyist, Vice President for Governmental Affairs, Nevada Resort Association, spoke in opposition of S.B. 88. He stated S.B. 88 is unfair and damaging to our state and Nevada’s principle industry. He continued the bill was unfair because it singled out the industry which already contributed a substantial amount of revenue to the state’s General Fund and local government. He said any tax on the gaming industry will negatively impact the many families and businesses which are directly or indirectly linked to the continued economic success of this industry. Mr. Mulhall commented S.B. 88 is damaging to an industry that is already facing great challenges. He noted Senator Neal had mentioned the many properties that exist outside the state that provide competition for Nevada. He explained from the spread of legalized gaming to the progression of tribal gaming, these new forms of competition are already predicted to have an economic impact on Nevada’s gaming industry, and as a consequence our state’s economy and revenue structure.

Michael Hessling, Executive Vice President and General Manager, San Remo Las Vegas Hotel and Casino, said as a representative of the gaming industry, he was aware of the important role that the Legislature and regulatory bodies play in overseeing Nevada’s gaming industry. He noted Nevada is unparalleled today in the world gaming economy both in its importance as the economic engine of the State of Nevada and its integrity in terms of the regulatory process.

Mr. Hessling said he would discuss why S.B. 88 would hurt the gaming industry. He noted the rate of growth, and gaming revenue and taxes have dropped significantly in recent years. He said this has led to speculation about the overall economic well-being of the industry, and the role of gaming as the principle provider for state government as the twenty-first century approaches. Mr. Hessling noted taxes contributed by the gaming industry amount to $570 million or 35 percent of the state General Fund. He presented Nevada Resort Association Presentation to the Senate Taxation Committee (Exhibit F. Original is on file in the Research Library.). He stated these are direct taxes and fees which only the gaming industry pays and they are significant and integral to state and local government. Mr. Hessling commented the contribution is made not just to the state General Fund. The gaming industry in Nevada contributes another $36 million through county license-fee collections. He noted these are part of an overall $2.2 billion in annual contributions to federal, state and local taxes. He pointed out gaming taxes and the entertainment tax account for 38 percent of the state General Fund. He said in addition, a significant portion of the 37 percent, which comes from sales tax, is paid by tourists or tourist-related businesses. He stressed a tax on tourists is in effect a direct tax on the gaming business.

Mr. Hessling said the gaming industry also pays construction sales taxes on properties such as the Bellagio Resort and the Mandalay Bay Resort and Casino. He noted gaming, as the largest employer in this state, also pays a lion’s share of the business tax, amounting to about $18 million. He emphasized over 70 percent of the state General Fund comes from sales and gaming taxes.

Mr. Hessling said by comparison, 48 percent of California’s General Fund is funded by corporate and personal income taxes. He noted every other state, which has legalized gaming, has a personal or corporate income tax. He called attention to the fact that Nevada is one of three states with no personal income tax and no business tax on receipts. He cited a recent study by the University of Nevada, Las Vegas, International Gaming Institute (UNLV-IGI), which said the total contribution of the hospitality industry of gaming taxes and fees paid, sales and use taxes paid, excise taxes paid and the business license taxes paid totaled $749,770,900. He said this is a major contribution by one industry to the state’s General Fund. He stressed the continued positive health of the gaming industry is important to Nevadans because the continued success of the gaming industry means success for the many families and businesses which directly and indirectly benefit. Mr. Hessing stressed if not for the gaming industry, Nevadans would be paying many of the taxes imposed in other states as shown in Exhibit F.

Mr. Hessling continued Nevada also has an unemployment rate that is below the national average, and Nevada is ranked number 48 among all states for an estimated tax burden for a family of four. He questioned if it was wise to jeopardize $276 million in payroll to people that live in Las Vegas and North Las Vegas to possibly generate $113 million more for the state fund.

Steven Comer, Partner in Charge, Arthur Andersen LLP, discussed the financial condition of the gaming industry and how it related to the industry’s tax structure. Mr. Comer said financial information was received from many sources including published annual reports, the Securities and Exchange Commission, Wall Street analysts and the Nevada Gaming Abstract (NGA), (published in 1998 by the State Gaming Control Board).

Mr. Comer referred to Exhibit F, explaining that public companies are organized as holding companies and those companies own subsidiary companies which are the licensees that conduct gaming in Nevada. He stated his firm estimated the reported industry income for the State of Nevada was approximately $550 million for 1998 or about $350 million after federal income taxes. He commented the investment base for the gaming industry in Nevada is close to $20 billion or a 2-percent return after tax. He noted these are very large numbers and this is a very large investment.

Mr. Comer said an indicator to determine profitability is a pre-interest return to view profitability so that it can be compared to other investments. He said the number shown in the NGA is almost 9 percent. He noted the corporate prime rate is 8 percent and costs of actual equity are substantially in excess of those. He emphasized a business can not be run in the long-term when the money costs 10 to 15 percent. He clarified the industry’s low return coupled with the market outlook was the reason the stocks were significantly down from their highs. He said most gaming companies have come substantially off their highs because Wall Street looks at cash flow to determine valuations. He explained the cash flow for gaming companies in Nevada was approximately $2 billion to $2.5 billion before all interest costs, repayment of debts, and any capital replacement and depreciation. Mr. Comer continued Wall Street uses a normal valuation of five to seven times cash flow to get an idea of what a company is worth. He noted statewide assets were worth between $12 billion to $15 or $16 billion. He stressed the assets were worth approximately what they cost but the Standard and Poor’s 500 Index average book value to price ratio is three times. He stated this means those company stocks were selling on average at three times what our companies were selling for, in relationship to what they had invested in physical assets.

Mr. Comer said he would like to address how our gaming tax would look if it were stated as a percentage of our net income and could be compared to other states. He referred to Exhibit F, page 15, Comparison of State Gaming Taxes. He noted to compare the burden of the gaming industry across states, it was necessary to equate our gaming taxes, which are on gross revenues, to compute the net income. He explained the gaming industry pays $550 to $600 million in gaming taxes and licenses. He stated pre-tax income is $1 billion for the industry, and the gaming industry pays 50 percent of its income in gaming taxes. Mr. Comer said other state taxes were in the general range between 5 to 10 percent. He noted combined with the federal taxes which the gaming industry pays, approximately 70 percent of its income is paid in taxes. He emphasized for every 1-percent increase in the tax, profitability would decrease by another 10 percent.

Mr. Comer continued the impact of a tax increase could impact salaries, wages and jobs for people. He continued one of biggest impacts would be a reduction in capital expenditures and replacement capital expenditures that occur, such as carpet replacement, room refurbishment, and adding new amenities. He stated this is not wanted because this would reduce the competitive ability to draw customers. He noted more expenditures are required by the casinos to continue to draw customers. He concluded this would potentially drive stock valuations down, which would hurt the ability of the gaming industry to borrow and reduce the ability of the gaming industry to increase aggregate taxes that are paid by the industry to the state. In response to a question, Mr. Comer stated the revenues in this report were not stated in accordance with generally accepted accounting principles because there are revenues given away which are included in the NGA. Senator Neal questioned the accuracy of Mr. Comer’s numbers, when compared to the NGA, and Mr. Comer said the difference was the gaming control board accumulated costs and revenues on a standard financial statement.

Roger S. Trounday, Lobbyist, Executive Vice President, John Ascuaga’s Nugget, testified Nevada is surrounded by gaming. He noted every state, except Utah and Hawaii, has some form of gaming. He commented the competition is challenging Nevada because by the year 2000, 90 percent of the population in the United States will reside within 200 miles of casino gaming. He said fewer gamblers came to Las Vegas during the past 12 months and passage of California’s Proposition 5 was a real concern to the Nevada gaming market. He stressed California’s 107 tribes operate Nevada-style gaming and another 40 tribes are petitioning the state to open a gaming operation. He noted California tribal gaming accounted for $1.4 billion in revenue for FY 1997, with estimated profits of $650 million annually. He called attention to  Exhibit F, page 21, which shows possible Indian gaming sites in California. He estimated a possible $400 million annual economic impact because one-third of Nevada’s visitors are from California and there will be casinos much closer to home in California. He stated the percentage of California visitors coming to our gaming jurisdiction declined from 36 percent in 1987 to 25 percent in 1997.

Mr. Trounday said nationally, one-third of the nation’s 557 tribes already operate some form of gaming, amounting to $6.7 billion in gross gaming revenue. He compared this to Nevada’s gross gaming revenue of $7.8 billion in FY 1997 and noted tribal gaming had some clear advantages not provided to Nevada. He commented they do not have the regulatory system that Nevada has, they do not pay federal or state taxes and do not have to abide by the National Labor Relations Act. He stressed Native American gaming is just one concern because Nevada is in direct competition for tourism trade with places like Disneyworld or Hawaii. He said transportation and airline service issues are also important to Nevada.

Mr. Trounday continued if Wall Street is not convinced the stock holders will realize a return on the investment, publicly traded companies in Nevada will not have the capital they need to build new properties, expand existing properties or reinvest their properties to ensure they are attracting more visitors. He agreed with Mr. Comer that Las Vegas has new facilities, which have assisted the economy in Las Vegas, but now those properties have an obligation to be competitive by keeping the properties fresh. He continued they must constantly upgrade their facilities and attractions and improve their product in order to stay competitive. He noted there are many examples of properties in Las Vegas and Reno that did not reinvest and today were closed. He stated companies must improve their property at all times. Nevada has a good business climate and it is the reason why so many companies reinvest in the Nevada economy. He stated they helped the Nevada economy grow and they want to make sure the money invested keeps the state competitive.

Mr. Mulhall said the industry is continuing to invest and gamble on Nevada. He noted the economic reality is gaming is now a global competitor. He stressed if this bill were to become law, marginal properties would be put in jeopardy and larger firms would have to cut back on hiring, reinvestment and new ideas. He concluded our (Nevada Resort Association) prosperity is Nevada’s prosperity.

Senator Coffin asked Mr. Comer if his employer had many gaming clients. Mr. Comer said his firm is a large international firm with a varied practice and an expertise in gaming. Senator Coffin asked Mr. Comer about gaming tax policies overseas. Mr. Comer said very high taxes have been put in place to discourage gaming. Senator Coffin said he wanted to determine the accuracy of Mr. Comer’s calculation of the gaming tax rate being the equivalent of a 50 percent income rate, because the gross of the properties is unknown. Mr. Comer answered those numbers come from the NGA. The 1998 gaming taxes were $590 million and the income tax is the tax rate applied to income before the tax. He noted he took the income actually reported in the abstract, adjusted it for those taxes and then adjusted it for corporate interest and corporate expenses not reflected in the gaming abstract. He said $550 million in taxes divided by a pretax income of $1.1 billion is a 50-percent rate. He noted this is directly comparable to how other states apply income taxes.

Senator Schneider asked Mr. Comer to explain why Nevada was ranked 48th in tax burden in the United States. Mr. Comer said studies have been done which place Nevada as one of the lowest in tax burden of individuals in the United States. He noted other states derive 50 percent of their taxes from personal or corporate income taxes and Nevada does not have those taxes.

In response to a question, Mr. Comer said gross gaming revenues meant the net win on a table adjusted by credit collected before it was taxed. He said the biggest deduction used came from taxes not paid on credit-winnings markers, until actually paid. He reiterated it was based on gaming winnings less only gaming losses and all other expenses after the gross tax was paid to the state. Mr. Hessling clarified casinos counted the money they had at the beginning of the day and again at the end of the day and the difference was what they won or lost. Senator Neal asked if the lucky buck was subtracted from any game. Mr. Hessling replied he did not know. Senator Neal asked if gaming should be operated in this state without any controls. Mr. Hessling answered no, gaming is a cash-intensive industry and for the integrity of the industry, assurances are needed and the regulatory system accomplishes this in Nevada. He stated the public has demanded a high level of integrity. He stressed the State Gaming Control Board and the laws from the Legislature have allowed the mechanism to be put in place and to develop so that gaming is highly respected as an industry.

Senator Neal said the state has the authority to impose any fee it desires. Mr. Hessling said he did not agree that additional tax was needed but if the determination were made, it would happen.

Robert Canter, Concerned Citizen, testified for S.B.88. He said gaming taxes can and should be increased. He said there had not been an increase for several years and they could and should pay more.

Jack Lipsman, Vice President, the Nevada Casino Dealers Association, read the following statement for the record:

Pat T. Fladager, Concerned Citizen, testified for S.B. 88, noting while the casinos continue to expand, paying a higher percentage in other states, they are willing to let the taxpayers carry the burden in our state. They have installed the Megabucks machines, which pay millions, and they use the gamblers in the state to make up the losses. She said there are many complaints of how the casinos have tightened the machines. She said Nevada needs gambling but we also need fair treatment for taxpayers.

John E. Kraft, Concerned Citizen, spoke for S.B. 88. He stated he recently built a 4,000 room hotel and casino which will employ several thousand workers. He noted the workers will bring their families to Las Vegas and this would impact the roads and infrastructure of the community. He said the next step would be a raise in property taxes and other taxes to fund bonded indebtedness. He emphasized he supported this bill because it meant equity in taxation.

Andrew L. Barbano, Lobbyist, Casinos Out of Politics, testified for S.B. 88 referring to Testimony of Andrew Barbano (Exhibit G).

Knight Allen, Concerned Citizen, testified for S.B. 88, noting the people bear the burden of taxation and 70 percent of the people support an increase in the gaming tax.

Bob Fulkerson, Director, Progressive Leadership Alliance of Nevada (PLAN), said PLAN was a coalition of 39 organizations begun in 1994 to help create more progressive solutions to our state’s problems. He said PLAN includes organizations representing labor, women’s environment, low income, civil rights and more. He noted PLAN had not developed a unified position on S.B. 88 but Senator Neal was to be commended for bringing this issue to the table. Mr. Fulkerson stated even though the economy is healthy, there are necessary programs that are not being funded such as programs dealing with the elderly, disabled, drug and alcohol treatment programs, and mental health programs. He said federal money previously made up a huge share of the state budget but is decreasing. Mr. Fulkerson commented our tax system is not working and PLAN feels this proposal needs to be considered within the context of the overall state taxation problems. He noted the University of Nevada, Reno, through a grant with the Ford Foundation, was planning to do a study of Nevada’s state tax and budget system. He commented the coalition looked forward to discussing the results of the study, when it is completed.

Juanita Clark, Charleston Neighborhood Preservation (CNP), said CNP strongly endorsed S.B. 88. She said the City of Las Vegas has devoted very little funding towards building neighborhood parks. She noted funds were diverted to other areas such as advertising for gamblers and tourists to visit Las Vegas.

Sam Dehne, Concerned Citizen, testified for S.B. 88, stating he was a longtime Reno resident and frequently attended city, county and other government agency meetings. He commented that a recent Reno Gazette-Journal article indicated very low attendance at hearings because the general public is not interested in bills such as S.B. 88. He noted in Reno, property tax revenue had gone up 18 percent each year for the last 4 years. He said he had nothing against casinos except they do not pay their way. As an example, the Atlantis Casino Resort, near his home, had caused blight and devastation to the neighborhood. Mr. Dehne expressed the opinion that casino profits should be dedicated to improving the environment, dealing with gangs, school problems and low wages.

James W. Hulse, Lobbyist, Common Cause Nevada (CCN), commended Senator Neal for sponsoring S.B. 88. He said the Price Waterhouse report, (Fiscal Agenda for Nevada: Revenue Options for State and Local Government), commissioned by the Nevada State Legislature in 1990, warned that by the mid-nineties Nevada would face a budget shortfall. He commented that Mr. Trounday and other testifiers talked about the burden being placed upon gaming but very few have talked about the burden gaming has placed upon the communities. In Mr. Hulse’s opinion, the casinos are not paying their way and the proposed tax increase in S.B. 88 is fair. He emphasized the people in this state know that money contributed to elected officials in this state comes from the gaming industry. He stressed the public knows many lobbyists are paid by the gaming industry. In closing Mr. Hulse said:

Senator Neal said he was pleased that a number of people came to testify in support of S.B. 88. He noted this body faces a change in policy with regard to the gaming industry. He concluded, "If we feed the horses just maybe the birds will eat … and we are going to have to look at putting the horses on a diet and giving the food to someone else in this particular case."

Shannon L. Bybee, Executive Director, International Gaming Institute, University of Nevada, Las Vegas, (UNLV-IGI), presented written testimony (Exhibit H). He stated, for the record, he was not attending the meeting in an official capacity. He said gaming had become a very capital-intensive industry, but the money comes from sources outside Nevada. He continued this state had enjoyed a great deal of prosperity as a result of the expansion and growth of the gaming industry. One reason there had not been a tax crisis previously was because the industry had exceeded growth projections. He noted investors are concerned about earnings and profits. Mr. Bybee said the issue is not whether Nevada casinos can afford to pay more taxes, it is whether investors will continue to be willing to invest in Nevada, if tax rates are increased. He referred to Exhibit H, saying the highest profit margins are in the states with the highest taxes because those states limit competition, by limiting the number of gaming licenses. He noted increasing gaming taxes in Nevada would reduce the profit margin further.

Mr. Bybee referred to Exhibit H, page 7, which shows there is a direct inverse relationship between tax rates and gaming revenue, and tax revenues and jobs. He noted the lower the tax rate, the more jobs; the more gaming revenue, the more gaming taxes. In closing, Mr. Bybee said the gaming industry has a substantial impact on the economy of this state beyond the taxes it pays and the people it employs. Much of Nevada’s economy is derived from the gaming industry. He noted anything that negatively impacts the gaming industry would have a negative impact throughout the state’s economy. Mr. Bybee remarked:

Senator Neal asked if the UNLV-IGI was funded by the gaming industry and Mr. Bybee replied no, it was soft money funding. Senator Neal confirmed that Mr. Bybee had worked as a member of the State Gaming Control Board. He asked Mr. Bybee if calculating gross gaming taxes included credit extended to patrons. Mr. Bybee answered no, credit extension was the amount of gaming revenues, reduced by revenue counted as revenue but uncollectable. He noted since it was never received, it was not taxed. Senator Neal asked if casinos were allowed to lease out space for gambling games. The answer was no but there are poker games where the house is not wagering against the player, but the player pays to play in the poker game, by a rake that is taken and dropped in a box or by paying rent for his seat. Mr. Bybee said it goes in the box and is counted as gaming revenue. Senator Neal asked if the gross revenue is determined by each game that is played within the house and the answer was no, it is the total of all of them.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association (NTA), spoke in opposition to the bill. She said in the NTA membership, the smallest number of members, the smallest percentage of total membership, the smallest dollars received and the smallest percentage of dollars to the whole were received from gaming. She acknowledged today’s issue is about a tax that has not been raised in 10 years. She said a gaming tax is no different than an alcoholic beverage or tobacco tax. She noted NTA has consistently opposed industry- specific taxes. She stated with efforts being made towards economic development and diversification, it was not a good idea to target industries for taxation.

Ms. Vilardo commented no one had discussed whether the money was being spent wisely. Ms. Vilardo stated there was a change in the budgeting process in 1993. She asked if the base had been looked at since that time. She said the bill, as proposed, does not meet the criteria for evaluating taxes. Both the Governor and members of the Legislature have stated that the entire tax structure needs to be looked at because structural deficiencies have been identified. She concluded it is good policy to look for revenue sufficiency and whether it is meeting the needs, based on the businesses in the state, and the economic well-being of the citizens. Senator Coffin asked Ms. Vilardo if she favored a vote of the people on this tax. Ms. Vilardo said no, this is a policy decision that needs to be made before the Legislature.

Samuel P. McMullen, Lobbyist, Barrick Goldstrike Mines Inc., said he was against S.B. 88 because it is an industry-specific tax. He noted he was previously involved in policymaking and fiscal analyses at local, state, and administrative levels. He commented looking at the issue of tax rates versus market and emerging markets is an entirely different issue in this state.

Chairman McGinness closed the hearing on S.B. 88 opened the work session on S.B. 33.

Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, explained the effect of the bill on the state. He said the Department of Taxation and the Department of Motor Vehicles and Public Safety provided fiscal information. He compared the two reports and found the statewide impact for property tax was $38,197. He continued the big impact was the Department of Motor Vehicles and Public Safety, Motor Vehicle Privilege Tax impact of $161,618 per year. He concluded the total impact is $199,813.

Senator O’Connell reported she asked Ed Gobel to talk with the smaller counties and report back to the committee. Ed Gobel, Lobbyist, Council of Nevada Veterans Organizations, said he had contacted Nye, Lander and White Pine counties and was told this bill would not adversely impact them.

Senator O’Connell asked how many veterans could take advantage of the exemption. Senator Rhoads said 32,960 in FY 1998; 32,150 in FY 1999 and 35,231 in FY 2000.

SENATOR TOWNSEND SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)

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Chairman McGinness closed the hearing on S.B. 33 and opened the hearing on S.B. 156.

Mr. Welsh stated he met with Dino DiCianno, Deputy Executive Director, Department of Taxation, and determined this is a service related to the cost and reflected into the retail cost of any piece of tangible personal property required by statute. Mr. Welsh noted he talked with other states and found other states have varying types of services. He said when they are included in the retail sales price of tangible property, they are included for taxable purposes. He stated the difference is sometimes certain types of services are involved in the total sales price but no one includes one to the exclusion of all others.

Senator Townsend said dealers buy very specific software in order to provide the necessary documents and hundreds of thousands of the documents are printed each year. He said if the tax on documentation fees is removed, the software will need to changed again.

Chairman McGinness placed S.B. 156 on hold and opened the hearing on S.B.238.

SENATOR NEAL MOVED TO DO PASS S.B. 238.

SENATOR TOWNSEND SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)

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Chairman McGinness adjourned the meeting at 5:25 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

DATE: