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LAS VEGAS-Nevada voters in Clark and Washoe counties on Tuesday told the State Legislature that it wants to see hotel and motel room taxes increased by as much as 300 basis points to help make up a state revenue shortfall and help fund public education. They did so by voting “Yes” on an advisory question that was on their ballots on Tuesday. Clark County is home to the cities of Las Vegas and Henderson, and the Las Vegas Strip. If the 2009 Legislature fails to implement the tax hike the issue will be placed on the 2010 ballot, according to published reports.

The proposal is the result of a negotiated compromise back in May between the Nevada State Education Association, Wynn Resorts, Harrah’s Entertainment and Station Casinos. The NSEA agreed to stop supporting a ballot initiative that would have raised the tax on casinos’ gambling win to pay for higher teacher salaries and other educational improvements in exchange for the casino operators’ support for a higher room tax instead. Proceeds from the added room taxes would be used at first to help make up for budget cuts in the worsening state revenue shortfall, and later to supplement regular K-12 funding.

The ballot initiative that won’t go forward as a result of the compromise would have raised the state’s tax on large casinos to 9.75% from 6.75%, a 44% increase. The compromise has the three casino operators encouraging the Nevada legislature in 2009 to instead raise the room tax as high as 13% from its current 9%, an added cost that would be passed directly onto hotel guests.

The hike in hotel room taxes will require a two-thirds majority of the legislature. If ultimately enacted, by the Legislature or voters, it would raise an estimated $180 million in its first year. Jeremy Aguero, a principal with Applied Analysis, a locally based business research and advisory firm, tells GlobeSt.com that the actual figure is probably closer to $150 million–assuming room rates hold up and development projects continue to come online as scheduled–while Nevada’s budget shortfall is approximately $1.4 billion.

“It represents another tax imposed on the travel and tourism industry, upon which our tax system is already heavily reliant,” he says. “It raises questions with regard to the stability of our tax system.”

The NSEA’s decision to drop the ballot initiative comes six weeks after a Nevada state court ruled that the NSEA’s petition to raise casino taxes was properly written and that it may be used to gather signatures for a ballot initiative. The plaintiff in the case was the Nevada Resort Association. Carson City District Court Judge Miriam Shearing rejected the NRA’s claim that the changes made to the petition by the NSEA left it with the same flaws as a previous petition that the same judge had rejected.

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