Taxes, Employment, Education: Here’s Why Nevada Loves Gaming

I. Introduction

Hello, welcome to Bottomline Tax! Have you ever been to Las Vegas? Most people either hold intense memories of their visit or remember the craziest stories from friends who traveled there. Let’s talk about one thing that definitely stays in Vegas: Money. Nevada is home to one of the largest and most successful gaming industries in the world. With more than 200 casinos operating across the state, Nevada offers a variety of gaming options for tourists and residents alike. According to the American Gaming Association, the gaming industry in Nevada generated $14.84 billion in gross gaming revenue and supported 410,456 jobs in 2022¹. The gaming industry also contributes significantly to the state’s public finances, as it pays various taxes and fees to the state and local governments. In this article, we will explore how the gaming industry taxes benefit Nevada, how they are used to fund public services and infrastructure, how they impact the state’s economy and development, and how interest groups argue for and against rising gaming taxes in Nevada.

II. Gaming Taxes in Nevada

As we mentioned above, the gaming industry in Nevada set a record by generating $14.8 billion in gross gaming revenue in 2022. The state’s gaming industry has shown remarkable resilience, posting 22 consecutive months of more than $1 billion in monthly revenue². With all of that money going into the casino owners’ big pockets, you’re probably wondering how much they’re paying in taxes. Let’s take a look.

The gaming industry in Nevada is subject to various taxes and fees, depending on the type and size of the gaming operation. The main taxes imposed on the gaming industry are:

• Gaming Percentage Fees: These are monthly taxes based on the gross gaming revenue of each gaming licensee. The tax rates range from 3.5% to 6.75%, depending on the amount of revenue generated by the licensee³. Here’s a breakdown:
  

  Gross revenue of the licensee per month	Tax rate
  Below $50,000	3.5%
  More than $50,000 but not more than $134,000	4.5%
  More than $134,000	6.75%

  According to the Nevada Resort Association, the gaming industry paid $970,726,929 in gaming percentage fees, in 2022⁶.

• Gaming License Fees: These are annual or quarterly fees based on the number of games and slot machines operated by each gaming licensee. The fees for games vary from $100 to $1,000 per game, and for slot machines, it’s $20 per machine⁴. The Nevada Resort Association reported that the gaming industry paid $63,534,585 in annual and quarterly gaming license fees (for both games and slot machines) in 2022⁶.
• Live Entertainment Tax: This is a tax on the admission charge and other fees related to live entertainment events at gaming establishments. The tax rate for all admission charges collected is 9%⁴. For this one, the gaming industry paid $99,350,089 in 2022, according to the Nevada Resort Association⁶.

What do you think of those numbers? Chances are you were expecting smaller ones. If we sum the fees and taxes mentioned above we get $1,133,611,603, or $1.13 billion. How does that compare to taxes collected in previous years? Here’s the gaming industry’s revenue compared to what Nevada happily collected in gaming taxes from 2018 to 2023⁵:

III. Use of Gaming Tax Revenues

So far we have learned that Nevada gets a big tax contribution from the gaming industry every year, now we’ll look into the benefits that Nevadans get from this deal. According to the American Gaming Association, the vast majority of tax revenue from gaming is directed to Nevada’s General Fund, then redistributed on a biennial basis, at the direction of the legislature, for purposes including statewide education programs, transportation services, and general budgetary needs. Additional monies are funneled to local school systems and county governments¹.

The following table from the Nevada Resort Association shows exactly how much of the state’s General Fund comes from the gaming industry⁶. Here we can see that from the total $5.43 billion in the General Fund, $1.9 billion came from gaming, which is about 35%.

This percentage was recently confirmed during the 2023 edition of the Global Gaming Expo, in which the American Gaming Association’s CEO Bill Miller cited Nevada’s numbers during his opening remarks at the start of the trade show⁸.“In Nevada, the gaming industry funds roughly a third of the state’s general fund and is the single largest contributor to education spending,” Miller noted.

Once our tax dollars enter Nevada’s General Fund, what’s their final destination? Guinn Center answers this question with the following infographic from the 2021-2023 Biennium⁷:

With more almost half of the General Fund being used for education, and more than a third being used for healthcare, the benefits that the gaming industry brings to Nevada are undeniable, but we’re not done yet. Something that cannot be ignored is that, other than being a great tax dollar supply for the state government, the gaming industry is a job creation powerhouse.

IV. Impact of Gaming Taxes

We’ve learned that gaming taxes are an important source of revenue for Nevada, as they help fund various public services and infrastructure projects that benefit the state’s residents and visitors. It is time to consider the impact of Nevada’s gaming industry in employment: Here’s a breakdown of how gaming taxes also support job creation and economic development:

• Direct employment: The gaming industry employs hundreds of thousands of workers in Nevada, ranging from casino dealers and hotel staff to security guards and entertainers.
• Indirect and induced effects: The gaming industry also generates economic activity and employment in other sectors that supply goods and services to the industry or benefit from the spending of gaming employees and visitors. For example, the gaming industry stimulates the demand for transportation, food and beverage, retail, entertainment, and construction industries.

Here’s an infographic from the Nevada Resort Association that details the Gaming and Tourism impact on Nevada’s employment in 2022⁶:

Innovation and diversification: The gaming industry also fosters innovation and diversification in Nevada’s economy, as it invests in new technologies, products, and markets that enhance its competitiveness and create new growth opportunities. For example:

• The gaming industry has been a leader in adopting and developing digital platforms, such as online gaming, mobile apps, and e-sports, that attract new customers and expand the industry’s reach.
• The gaming industry collaborates with other sectors, such as health, education, and energy, to leverage its expertise and resources to address social and environmental challenges.
• The gaming industry has partnered with the University of Nevada, Las Vegas, to establish the International Gaming Institute, which conducts research and education on gaming-related topics and supports the development of the gaming workforce⁹.

V. The Gaming Tax Debate: Should Nevada raise Gaming Taxes?

The debate on the taxation of the Nevada gaming industry is quite complex and involves a variety of perspectives. Even though this discussion is decades old, we’ve decided to focus on a recent chapter of the story. In early 2020 there was an initiative from the Clark County Education Association to add a fourth tier to the state’s gaming tax, placing a levy of 9.75 percent on all monthly gross revenue of more than $250,000. At the time, the three-tiered tax topped out at 6.75 percent on all monthly gross revenue of more than $134,000¹⁰. We will present below some arguments from both sides of the debate.

Here are some arguments for Nevada raising the gaming tax:

• More revenue for education: The initiative, sponsored by the Clark County Education Association, would raise more than $300 million annually for the state’s general fund, which could be used to invest in K-12 education and improve the state’s ranking in education funding¹⁰.
• Low tax rate compared to the national average: The initiative would increase the gaming tax rate from 6.75% to 9.75% for the largest and most profitable gaming establishments, which is still below the national average of 10.7%. The tax rate for smaller establishments would remain unchanged¹⁰.
• Diversification of the economy: The initiative would help the state diversify its economy, which relies heavily on gaming and tourism, by creating an educated workforce and attracting new industries. The initiative’s sponsor argues that the gaming industry can afford to pay more and that it would benefit from a better education system in the long run¹⁰.

Here are some arguments against Nevada raising the gaming tax:

• Damaging to the state’s economy: The gaming industry is Nevada’s economic engine and a 44 percent tax increase would hurt job creation, capital investment, and future economic development¹¹.
• It is unfair to single out one industry: The gaming industry already pays almost 40 percent of the state’s general fund revenue and has supported a broad-based business tax to fund public education. Depending on a single industry for taxation is unstable and risky¹¹.
• Not directly benefiting education: The proposed gaming tax increase would go to the state’s general fund and not to schools. The gaming industry has a long history of investing in and supporting schoolchildren¹¹.
• Not reflecting the current market conditions: The gaming industry is facing flat or declining growth and increased competition from other states and countries. Raising the gaming tax would make Nevada less attractive for gaming operators and customers¹¹.

After the COVID-19 pandemic struck America’s economy, the initiative from the Clark County Education Association was still standing, and this prompted Howard Stutz from CDC Gaming Reports to present new arguments against raising the gaming tax:

• Nevada’s casino industry is struggling: The COVID-19 pandemic has caused a huge decline in gaming revenues, visitation, and conventions. The recovery is expected to be slow and uncertain. Increasing the gaming tax would further damage the industry and the state’s economy¹².
• Nevada’s gaming tax is not comparable to other states: Nevada has a low gaming tax rate, but it also has a large number of casinos that compete with each other. Other states have higher tax rates, but they also limit the number of casinos and grant them regional monopolies. Nevada’s gaming industry also contributes more to the state’s General Fund than any other industry¹².
• Nevada needs a broad-based tax to support education: The gaming industry has supported a broad-based business tax to fund public education in the past. Targeting a single industry, especially one that is suffering, is not a sound or stable approach. A broad-based tax would be more fair and reliable¹².

This tug-of-war is far from over, and we can expect to see both sides clashing shortly as the economy recovers. After learning about Nevada’s gaming taxes and how they’re used to fund public services, and also how the gaming industry is the biggest employer in the state and provides such an economic boost to Nevada, where do you stand on this debate? Thanks for reading!

Article Sources:

¹ American Gaming Association. “Nevada – American Gaming Association https://www.americangaming.org/state/nevada/”

² Forbes. “Nevada Set A Gaming Revenue Record In 2022 With $14.8 Billion https://www.forbes.com/sites/willyakowicz/2023/02/01/nevada-set-a-gaming-revenue-record-in-2022-with-148-billion/”

³ Ballotpedia.  “Nevada Gaming Tax Increase on Monthly Revenue above $250,000 Initiative (2022) https://ballotpedia.org/Nevada_Gaming_Tax_Increase_on_Monthly_Revenue_above_$250,000_Initiative_(2022)”

⁴ Nevada Gaming Control Board. “Nevada Gaming Control Board: License Fees and Tax Rate Schedule https://gaming.nv.gov/index.aspx?page=94″

⁵ Nevada Gaming Control Board. “Nevada Gaming Control Board: Information Sheet https://gaming.nv.gov/index.aspx?page=247″

⁶ Nevada Resort Association. “2023 Nevada Gaming Fact Book  https://www.nevadaresorts.org/factbook/NRA-2023-Factbook.pdf”

⁷ Guinn Center. “Visualizing Nevada’s 2021 – 2023 Budget https://guinncenter.org/wp-content/uploads/2021/03/Guinn-Center-Nevadas-2021-2023-Budget.pdf”

⁸ The Nevada Independent. “Casino economic impact grows to $329B per year; Nevada remains leading gaming state https://thenevadaindependent.com/article/casino-economic-impact-grows-to-329b-per-year-nevada-remains-leading-gaming-state”

⁹ University of Nevada, Las Vegas. “International Gaming Institute https://www.unlv.edu/igi”

¹⁰ Las Vegas Review-Journal. “Teachers union files initiative to raise Nevada’s gaming tax https://www.reviewjournal.com/news/politics-and-government/nevada/teachers-union-files-initiative-to-raise-nevadas-gaming-tax-1935299/”

¹¹ Las Vegas Review-Journal. “Gaming tax hike plan adds tinder to Nevada’s legislative races https://www.reviewjournal.com/business/business-columns/inside-gaming/gaming-tax-hike-plan-adds-tinder-to-nevadas-legislative-races-1938287/”

¹² CDC Gaming Reports. “Increasing Nevada’s gaming tax during the pandemic is not a good idea https://cdcgaming.com/commentary/increasing-nevadas-gaming-tax-during-the-pandemic-is-not-a-good-idea/”