The New Face of the Mob

Behind Guinn's push for drastic new taxes is a scheme to make Nevadans permanent serfs for a Syndicate that never left

By Del Tartikoff & W. W. Anderson

After Kenny Guinn’s State of the State address, many Nevadans have been wondering why their governor seems to have had a personality transplant.

Elected in 1998 as a fiscal conservative Republican who’d promised to oppose taxes, Guinn just hours after reelection seemed to turn into a fanatic tax increaser suddenly utterly indifferent to the jobs he’ll destroy and the economic ruin he’ll leave in his wake.

But of course there’s been no real change in Guinn. Folks who think so just haven’t been paying close enough attention. Unfortunately, that’s most Nevadans.

These Nevadans never wondered why, back in ‘98, the big casinos had selected and bankrolled Guinn in the first place. Nor had they thought about the casinos’ long-running campaign, ever since the late ‘80s, to get state politicians to stick non-gaming businesses with hefty new taxes.

These folks didn’t pay attention when the Guinn forces trashed Republican Party rules in 1998 to steal the Clark County GOP Convention. If they even thought about it at all, they kissed it off, no doubt, as “just politics.”

When the deeply corrupt Greenspun organization, with its long history of complicity with the Mob’s Las Vegas activities, gushingly announced in October of 1998 its whole-hearted endorsement of the Guinn candidacy, it should have been a heads-up for every honest Nevadan.

“This newspaper has waited for Kenny Guinn to run for governor for over 20 years,” burbled the Las Vegas Sun.

Of course, a little over 20 years back was when the Mob was most firmly and overtly running Las Vegas and, behind the scenes, the State of Nevada.

Hank Greenspun-chum Moe Dalitz was skimming at the Desert Inn. Herb Tobman and Morry Kleinman were skimming at the Stardust and the Fremont. Long-time Greenspun-chum, ex-con and admitted murderer Benny Binion was skimming at Binion’s Horseshoe. And Greenspun-chum Harry Claiborne, a federal judge, was taking bribes from Storey County whoremaster Joe Conforte. Hank Greenspun himself was still expanding his real estate empire in what is now the Green Valley section of Henderson—developments he’d begun with secret pension-fund loans from the mob-controlled Teamster Union.

Lots of Vegas old-timers and wiseguys are wistful for those old days. Remember how the movie Casino ends, with the remark about “Vegas shouldda been paradise for us, but we screwed it all up”? Author/scriptwriter Nicholas Pileggi got the original version of that line from an interview he had with mobster Frank Culotta.

But what Nevadans are witnessing today is a consciously concocted effort to try to bring the old days back. That’s the real agenda behind the Nevada Resort Association’s seemingly odd—but massive—war to force higher taxes on non-gaming businesses based in Nevada.

The gamer goal is easy to see once you look at: 

• The actual nature of the Gross Receipts Tax,

• The actual fiscal situation facing the state,

• The gamer's long-standing and seemingly irrational hostility to diversification of the Nevada economy, 

• The powerful, but rarely acknowledged, evidence that the Syndicate still dominates Nevada's big casinos, and

• What's really at stake for the gamers: The extremely lucrative 'skim'.

The Gross Receipts Tax

The Gross Receipts Tax, or GRT, as it’s called, would only do one thing—drive non-gaming businesses out of Nevada. Which is why, the evidence suggests, it is being pushed so hard by the Nevada Resort Association. Not only was the NRA formed way back in the '50s by  skimming, Mob-dominated casinos, it has ever since then been the bastion of the old-line types who have fought diversification of the state economy or any change that could reduce their control over the state political system. (More about this later.)

The GRT was recommended by the Governor’s Task Force on Tax Policy after the NRA's mole on the panel, Mike Sloan, a veep at the Mandalay Bay casino corporation, twisted arms and forced the tax into the panel's official recommendations. In truth, the tax would not deal with the State of Nevada’s fiscal problems at all, since those problems don't stem from a real lack of revenue but from the unchecked looting of taxpayer funds by special interests who have allied themselves with the NRA. Actually, the GRT would probably cost the state more revenue than it would bring in (at least at the rate of tax the task force recommended). 

There are several features of the Gross Receipts Tax that would make it an ideal instrument for driving non-gaming companies out of Nevada.

First, wherever any state or city has installed a GRT, it has been universally loathed because it is such a constant, frustrating and time-consuming pain in the rear. Not only does the tax subject all businesses, regardless of size, to a constant hassle by an army of state tax auditors. It also requires every category of business to pay lots of protection money to state lawmakers every year, trying to stave off the ever-higher tax rate adjustments that are so easy for the politicians to sneak into bills.

Second and even worse, a GRT destroys the competitiveness of a state’s businesses. If they don’t leave the state after the tax is imposed, there’s a good chance they may eventually go under. Both Hawaii and Washington have versions of the GRT, and in each case the tax has been a powerful force motivating businesses to leave those states. Last December a Washington state commission—appointed by a Democratic governor and Democratic legislature—recommended after a year of study that the state abandon its 67-year marriage to the GRT. Not only does the tax make Washington state businesses uncompetitive and drive them to leave, said the commission, but it was costing the state significant revenue.

If you have any doubts on this subject, you need to read the analysis of the tax by the experts at the Nevada Policy Institute. (Read both the “Review of the Literature on the Size of Government and Economic Growth,” and “The Destructive Impact of a Gross Receipts Tax.”)

The Actual Fiscal Realities

On the actual fiscal situation, take a look at this revealing graphic prepared by the Las Vegas Review-Journal. Based on the task force's own numbers, it shows that even adjusted for inflation, growth in total state revenue from 1989-90 through 2000-01 more than exceeded Nevada’s growth in population. In other words, growth has been paying for itself—making liars out of the gamers and their shill in the governor’s chair.

Also, inspect the part of the graphic that’s labeled “Tax and Spending Trends.” It reveals that the state’s alleged future “structural deficit” is entirely concocted by Guinn—namely, his insistence that the state in the future must spend your tax dollars even faster in the future than your current tax burden will support.

Thus, anyone who thinks Guinn just might be working for the gamers who bought the governor’s chair for him, has to look at his eagerness to increase future state spending (despite the greater efficiency of the private sector at solving social problems) in a new way: Could the real purpose of Guinn's huge increases in projected spending simply be to justify new taxes of a type and level that would put a bullet through the head of Nevada business diversification?

Gamer Hostility to Diversification

It seems irrational, but the old-line NRA faction of the casino industry in Nevada has for a long time hated the very idea of diversification of the Nevada economy. On the face of it, you'd think that they would welcome the possibility that more businesses would move into the state and share the tax load. But they don't and they haven't for a long time. 

A September 1998 story in Nevada Journal magazine lifted the curtain on the problem a little, noting "diversification of the Nevada economy has always had more friends in name than in actual fact. Administration after administration has publicly given the goal lip service while also privately recognizing-and at times quietly collaborating with-resistance to the idea in the state's casino sector." 

The article also highlight an aborted scheme by then-Governor Bob Miller to gut the state Commission on Economic Development—the job of which is to diversify the state economy—and collapse it into the casino-dominated state Commission on Tourism. Indeed, throughout his administration, the article makes clear, Miller consistently sought to hobble the CED and hamper the performance of its lawful mission. 

In this context it is relevant that Bob Miller was the son of one Ross Miller, a long-time Syndicate hoodlum and strip club operator who in the 1950s had been sent out to Las Vegas to front for Sam Giancana and the Chicago Mob while managing the casino 'skim'. According to former Teamster leader and FBI informant Jackie Presser, both the future governor and his daddy had held "points" in the notoriously skimmed Dunes casino when it was secretly controlled by the Mob and financed by the Mob-controlled Teamsters pension fund. At the time, the future-governor Bob Miller was Clark County District Attorney, with clear responsibilities to enforce the law, rather than profit from breaking it.

But don't think the old-line, anti-diversification Nevada Resort Association casinos have been content to rely entirely on the governors they could place in office. As they'd been doing since the late '80s, the NRA continued in the '90s to pay the corrupt Arthur Andersen accounting firm large sums to come up with mendacious white papers that, to the ignorant, could appear to justify changing Nevada's tax structure. 

One such "study," quietly submitted to lawmakers in the 1999 Legislature, took direct aim at the ongoing diversification of the Nevada economy. It tried to "prove" that new manufacturing businesses coming into the state were actually costing the state more revenue than they were yielding. (Unfortunately, the NRA-AA study does not appear to be available from any source on line. However, a refutation of the study's arguments—produced by the Nevada Commission on Economic Development (NCED)—can be found at http://www.nevadalabor.com/cop/ncedstudy.html .) 

With the 1999 Arthur Andersen study, the Nevada Resort Association tipped its hand and revealed its real goal. The white paper implicitly showed the source of the NRA's great anxiety, and the real reason why the NRA has been seeking a "broad-based tax" on non-gaming businesses who supposedly don't pay their "fair share." It was the finally ludicrous nature of the NRA arguments in the paper that left little question about what the NRA fears most: Good, successful new firms moving into the state. It also left little doubt how thick and disingenuous is the propaganda that the NRA has been presenting to the Nevada public.

If the NRA was honest in its desire for other businesses to help carry the tax load in Nevada, it would not, in its 1999 study, have gone all out trying to undercut diversification of the Nevada economy. Yet as the NCED subsequently showed, the NRA and its corrupt Arthur Andersen mouthpieces had tried to turn the truth on its head and make it appear that major non-gaming firms that are the source of  major state revenues but don't use many state services are somehow a great threat and must be kept out of the state. In actual fact, as the  subsequent the NCED study showed, it is the resort association itself who is getting a free ride, since its low-income workers place the heaviest demand on taxpayer-provided social services.

Before proceeding, let's take a look at the 'fair share' question. Nevada Resort Association director Bill Bible (whose father, Senator Alan Bible, provided legal representation in Nevada for the Mob-controlled Teamsters union) wrote the Review-Journal in December, asserting that "gaming-only taxes directly fund almost 45 percent" of the moneys in the state General Fund. But Bible strategically failed to tell readers three important things:

• That the General Fund is only 30 percent of the entire state budget—meaning that direct gaming taxes, at best, constitute only some 13.5 percent of total state revenues.

• That Nevada sales taxes raise about three times more than do state gaming taxes. In FY 2001, for example, sales taxes totaled some $2.04 billion for the biennium—far outweighing the gaming industry's $723 million. Most sales taxes, in fact, never are routed to the General Fund; for example, in FY 2001, $1.4 billion went to counties, cities and school districts. Only 7 percent of gaming taxes, on the other hand, did not go into the high-profile and publicly watched General Fund.

• Finally, Bible and the other NRA mouthpieces have repeatedly failed to admit that non-gaming firms pay a much larger share of Nevada's state and local expenses than do the casinos. The following remarkable chart, reflecting federal figures, was recently released on the Nevada Policy Institute web site:

Some very well-informed observers in Las Vegas believe it is these numbers that have panicked the still-highly-corrupt Nevada gaming overlords. The moguls see that once Nevada's non-gaming businesses realize the full extent of their economic contribution to the state, the gaming sector must, over time, continue to lose its already disproportionate political clout. That would mean increasing independence for Nevada gaming regulators and the politicians -- such as the governors -- who appoint them. And should the casinos be subject to genuine regulation, that could spell doom for the off-the-books river of money -- the 'skim' -- still going into the pockets of today's smarter, more low-profile, Mob bosses and the large corporations in bed with them. 

Next installment: The Syndicate never left.