Casino Connection Nevada

What’s In a Number?

'Win' doesn't mean 'made'

by Bill Bible

What does it really mean when the newspaper reports Nevada casinos “won” $1.146 billion in the month of July? It means that $1.146 billion was “won” (total cash won from patrons less total cash paid out to patrons) through all gaming activities in Nevada casinos—slot machines, table games, sports books, etc. It doesn’t mean that the gaming industry “made” $1.146 billion or that total industry profit was $1.146 billion. You see, the “win” number is the total, or gross, number of dollars collected. It is before any expenses—such as capital costs, operational costs, worker wages or any other overhead needed to operate the casino—are deducted. And, it also doesn’t account for the significant gaming tax that is paid.

In July, more than $77 million in gross gaming tax was generated. So, when the press reports that Nevada casinos had a record month of “win,” it also means that casinos paid record taxes and the state had a record tax collection. And, because gaming taxes are paid on “win,” casinos pay the tax even if they are not making a profit and regardless of how high their expenses are. This “win” tax is a significant contributor to the state’s budget which helps pay for schools, transportation and basic public services.

While the “win” tax is the largest tax gaming pays to the state, it also pays taxes based on the number of slot machines, taxes based on the number of table games, and taxes based on ticket sales to, and other charges rung up in, venues with live entertainment. The gaming industry is the largest of only a few industries—such as mining and liquor—that pay such industry-specific taxes. Most businesses are not subject to such specific taxes.

In 2007 direct gaming taxes are expected to generate over $1 billion in Nevada taxes. To put this in perspective, in 2006 the state’s general fund revenue was a little more than $3 billion; that means if the numbers stay true 2007’s gross gaming tax alone could account for nearly one-third of the state’s funding. The only other state that depends so heavily on one industry for tax revenue is Alaska, which relies upon the oil mining and exploration industry to support its state budget.

Gaming also pays all the same taxes as do other businesses—payroll taxes, insurance premium taxes, liquor taxes and cigarette taxes. And, the gaming industry is also a substantial payer and collector of sales taxes. Adding all of these up totals slightly less than 50 percent of all state general fund collections. If you want a complete listing of these revenues and you have access to a computer, go to the Nevada Resort Association’s website at www.nevadaresorts.org. On the left hand of the home page, hit the pull down menu under “Gaming Gives Back.” There is a lot of good information on the gaming industry’s contribution to Nevada here and elsewhere throughout the website.

I think it is important for all resort employees and the general public to understand what a number like the “win” amounts mean when they are reported every month. First, they are gross revenues before any deductions for expenses, capital costs and taxes. They are paid regardless of profitability. Second, the gaming industry is one of the few, and certainly the largest, industry in Nevada to pay such industry specific taxes. And third, these taxes go to fund schools, roads and basic public services. And record wins also mean record taxes—a true “win” for the state and the industry.