The proposal is the result of a negotiatedcompromise back in May between the Nevada State EducationAssociation, Wynn Resorts, Harrah's Entertainment and StationCasinos. The NSEA agreed to stop supporting a ballot initiativethat would have raised the tax on casinos' gambling win to pay forhigher teacher salaries and other educational improvements inexchange for the casino operators' support for a higher room taxinstead. Proceeds from the added room taxes would be used at firstto help make up for budget cuts in the worsening state revenueshortfall, and later to supplement regular K-12 funding.

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The ballot initiative that won't go forward as a result of thecompromise would have raised the state's tax on large casinos to9.75% from 6.75%, a 44% increase. The compromise has the threecasino operators encouraging the Nevada legislature in 2009 toinstead raise the room tax as high as 13% from its current 9%, anadded cost that would be passed directly onto hotel guests.

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The hike in hotel room taxes will require a two-thirds majorityof the legislature. If ultimately enacted, by the Legislature orvoters, it would raise an estimated $180 million in its first year.Jeremy Aguero, a principal with Applied Analysis, a locally basedbusiness research and advisory firm, tells GlobeSt.com that theactual figure is probably closer to $150 million--assuming roomrates hold up and development projects continue to come online asscheduled--while Nevada's budget shortfall is approximately $1.4billion.

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"It represents another tax imposed on the travel and tourismindustry, upon which our tax system is already heavily reliant," hesays. "It raises questions with regard to the stability of our taxsystem."

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The NSEA's decision to drop the ballot initiative comes sixweeks after a Nevada state court ruled that the NSEA's petition toraise casino taxes was properly written and that it may be used togather signatures for a ballot initiative. The plaintiff in thecase was the Nevada Resort Association. Carson City District CourtJudge Miriam Shearing rejected the NRA's claim that the changesmade to the petition by the NSEA left it with the same flaws as aprevious petition that the same judge had rejected.

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