State faces massive budget deficit under a new governor who opposes tax increases

A legislative proposal to increase slot machine fees in Nevada is gaining steam as the state attempts to deal with a massive budget deficit under a new governor who opposes tax increases.

At the Legislature’s request, the state Gaming Control Board last year came up with alternatives to raise an additional $29 million in annual fees to cover the agency’s operations in fiscal year 2012 and beyond, according to a recent report in the Las Vegas Sun. One proposal would increase slot fees for casinos from $250 per machine per year to $410 and a separate quarterly fee per machine from $20 to $160. Other plans include graduated, per-machine fee increases based on the number of slots in operation and the addition of new, flat fees for operating slots.

In its analysis, the Control Board said the slot fee increases were workable because they would bring Nevada’s slot fees more in line with other states.

Unspoken in the analysis was the reality that taxes are often passed on to consumers in the form of higher prices. That could be done, as it is by longstanding practice, by “tightening” machines so they keep a greater percentage of wagers over time.

For Nevada’s largest casino operator and employer, MGM Resorts International, the fee discussion is indicative of a big-picture problem: a tax system that is too reliant on gaming.

“The industry we’ve seen these last couple of years isn’t a cash machine that’s impervious to economic changes,” MGM spokesman Alan Feldman told the Sun. “All these tax increases are going to be coming off the bottom line, which means less money for reinvestment.”

That’s bad for an industry facing stiffer competition from other entertainment options in the downturn, he said.

The industry pays the cost of regulation - along with the biggest chunk of services offered by the state - with taxes on gambling revenue, he added.

The Control Board collected $631 million in gaming revenue taxes in fiscal year 2010, down 4 percent from the previous fiscal year.

Combined with other taxes and fees, assessments on gaming account for about half of the state’s general fund.