We knew it was coming: initiative to make casinos pay your taxes

How would you like to never pay property taxes on your home?

It's the kind of freedom homeowners could imagine only in their wildest dreams -- the kind where they also win Megabucks.

But don't pinch yourself.

A proposed initiative petition would eliminate the property taxes Nevadans pay on their primary residences -- forever. Not only would you not pay a cent into the coffers of local government, school districts or the state, all the money lost in the abatement would be recovered -- with two-thirds more left over to fund transportation, schools and maybe even alternative energy projects and health care reform.

The initiative, to be filed in a few weeks, would raise its money from the holiest of sacred cows -- the gross gaming tax.

Of all the states with legal gaming, Nevada has always featured the lowest tax on what casinos win from their customers. The initiative seeks to increase the tax for top-tier casinos from the paltry 6.75 percent Nevada now imposes to the average paid by gamers in other states.

According to data on the American Gaming Association Web site, that would put Nevada's gaming tax at somewhere between 18 and 20 percent.

"It's a populist initiative," said Don Chairez, a former District Court judge.

Chairez, a Republican who has made unsuccessful bids for Congress and attorney general, may not have had elective success. But he and Las Vegas attorney Kermitt Waters have had initiative success.

Waters, a Democrat who is more concerned about an oil claim he has in the Bahamas, has never run for anything. But when he gets mad about something, he draws up an initiative.

Last year, it was PISTOL, the People's Initiative to Stop the Taking of Our Land. Waters created that in response to the U.S. Supreme Court's Kelo decision, which essentially allows government to take private property for the benefit of another private property owner. PISTOL passed with 63 percent of the vote and led to eminent domain reform at the Legislature this year.

PISTOL proved two things: Waters and Chairez can put together an initiative petition that will pass judicial muster and they have the resources to push a popular measure and successfully fight off opposition.

And what's more popular among voters than raising the gaming tax? Eliminating the property tax.

The new measure will be called the Tax Fairness Reform Initiative. The old taxation adage applies here perfectly -- tax the one hiding behind the tree.

The Strip's gaming companies are too big now to find cover, their branches poking out onto riverboats and race tracks and reaching across the sea to Asia.

Waters said he anticipates the gaming industry will recoil against the measure. But he has his own anger about the tax system.

"If you have a house, you don't own your home," Waters said. "You're paying the government for your home every year for the rest of your life."

Last week, former Assemblywoman Sharron Angle once again filed an initiative petition seeking to enact a constitutional cap on property taxes in Nevada. In the past she has been unable to gather enough signatures to pass her Prop. 13-style measure.

She wouldn't have to worry if Waters and Chairez qualify for the ballot. There would be no property taxes to cap.

Waters has been working with a legislator to vet his initiative. The Las Vegas lawmaker will undoubtedly become target No. 1 for the gaming industry. But efforts to take out those who propose raising the gaming tax have never been wildly successful.

For instance, Democrat Joe Neal trumped the industry and won re-election to the state Senate after going statewide with his own proposed gaming tax increase in the late '90s.

Neal, who subsequently retired from the Legislature, has long advocated raising the gaming tax. In an interview last week, Neal volunteered his services.

"I'll still campaign for raising the gaming tax," Neal said. "There is not enough money to support the indigenous population of Nevada. Raising the gaming tax would bring in the money that's needed for schools, for roads, for everything."

Waters said he doesn't want his initiative to end up in the Nevada Supreme Court, so he's already playing defense.

"The gaming companies will fight," Waters said. "But their industry is licensed -- it's a privileged license given to them by the state of Nevada, and they go off and build everywhere ... and they're paying 30, 40 percent there, while little ol' Nevada gets less than 6.8 percent."

Waters anticipates the effort to qualify the measure and keep it on the ballot will cost $500,000. He's courting donors. New York businessman Howard Rich helped bankroll the eminent domain measure last year.

Waters expects to file the initiative by the end of the month. The initiative would require the state at the beginning of each year to determine the average gaming tax paid in other states. Indian casinos would not be included in the calculation.

Right now, Waters is trying to earmark where all the revenue should go.

"I don't want to give it to the Legislature," Waters said. "They'll just waste it."

Waters is considering specifically designating money for road construction, teacher salaries, solar and wind energy projects, and possibly school materials and children's health insurance.

Wiping out the most stable source of government revenue -- the property tax -- is anathema to efforts to further diversify the tax base. Initiative petitions are clearly no way to make tax policy. But as we've seen session after session, neither is the legislative process here.

In 2003 -- the last time the gaming tax was increased -- the gaming industry agreed to pay a quarter of a percentage point more. Then it lobbied lawmakers to enact new taxes on consumers and businesses. In the end, many of the taxes backed by gaming, including a gross receipts tax on businesses, died. And to the casino industry's dismay, the gaming tax was increased by half a percentage point.

As a result, gaming is fond of explaining just how much it already "gives" to Nevada. In 2006, the industry paid just more than $1 billion in gaming taxes here, the AGA says.

The industry's stepped-up marketing campaign can be found just about everywhere these days. Ironically, the campaign "Gaming is more than just a game," could become the central theme of the initiative battle.

It's more than a game, it's a big business. And when the gamers take billions of dollars to China, it sure doesn't seem like they've been betting on Nevada.

Erin Neff's column runs Sunday, Tuesday and Thursday. She can be reached at (702) 387-2906, or by e-mail at eneff@reviewjournal.com.