Judge throws out gaming petitions seeking hike in casino tax rate

By Geoff Dornan

Appeal Capitol Bureau

Carson District Judge Bill Maddox threw out two petitions Friday that would have more than tripled the tax rate for Nevada's largest casinos.

The petitions were filed by Las Vegas lawyer Kermitt Waters. Both petitions were designed to raise the gaming tax rate for casinos earning more than $1 million a month in gross casino win - currently 6.75 percent - to the average of the maximum tax levied in other states where casinos are allowed. That would be about 22 percent this year, more than three times the current rate.

Both petitions also did other things including spelling out exactly how that added funding should be spent. And one of the two also called for elimination of the property tax in Nevada.

The Nevada Resort Association challenged the petitions arguing the descriptions of effect are "false and materially misleading" and that both deal impermissibly with more than one subject. The association also argued the language in the petitions would turn over the power to set taxes in Nevada to other states.

The association charged that both initiatives violate the requirement subjects within an initiative be closely and functionally germane to each other, not a collection of different subjects under one ballot question.

The NRA brief says the petition that would raise gaming taxes and eliminate property taxes all at once clearly violates that statute. The initiative without the property tax element, it says, contains at least seven different subjects including setting funding for road and highway construction, making direct payments to teachers, delegating tax authority to the treasurer, funding Nevada courts and promoting alternative energy and water resources.

Ruling from the bench, Maddox agreed with almost all the association's arguments. He said setting Nevada gaming tax according to the average in those other seven states would be an improper delegation of the Legislature's power and responsibility to set taxes.

He found that spelling out how the money should be spent also improperly delegated the Legislature's power and responsibility over spending of public revenues in Nevada.

He told Waters raising the gaming tax is one subject and that mandating how the money should be used is a second subject - violating the single subject requirement for initiatives.

He ordered resort association lawyers to prepare an order for him by next Friday and for Waters to file any objections by the following Friday.

Waters is expected to appeal the ruling to the Nevada Supreme Court.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.