Kudos to the Las Vegas Review-Journal‘s Howard Stutz for keeping an eye on an especially skanky provision of the economic-stimulus package, a sweetheart provision engineered by Sen. Harry Reid (D-NV). It awards companies — like vocal supporter MGM Mirage — a tax deferral, followed by a drawn-out payback of taxes on gains recognized from buying back distressed debt. (At least in contains a measure to incentivize capital improvements and technological upgrades.)
Don’t you wish the IRS was this understanding when your tax bill is due? There is an argument to be made that this encourages companies to at least make partially good on their debt instead of just walking away. However, there’s a much stronger case that Reid’s Rescue rewards the sort of foolhardly borrowing that now sees Las Vegas Sands, Station Casinos and Harrah’s Entertainment, all wheezing from overextended bank covenants or paying the light bill from revolving lines of credit, trying to buy out bondholders at a pittance and fending off investor lawsuits. The lesson learnt, if any, will be that it doesn’t matter what train wreck you get your company into, Washington will gladly step over the bloodied bodies of your debtors so that it can grace you with a tax incentive.
This is a disgrace and it rewards the very companies who were the prime architects of our current mess. But it’s great for Harry Reid: Now when potential GOP challengers seek casino industry support in 2010, the Majority Leader can simply remind the normally rightward-leaning casino CEOs just who crossed their palms with silver when times were bad.
Final score: Reid 1, Investors 0.
Stutz is certainly smarter than his boss, who brays anachronistic nonsense about a much-needed rail link to Orange County. (Reid giveth … then giveth again.) While auto traffic to Las Vegas from SoCal hasn’t suffered notably (yet), some forward thinking would be welcome, instead of putting most of the city’s eggs in the already congested I-15 basket. The convenience appeal of a high-speed link to the greater Los Angeles area is (or should be) obvious and this is a field in which other nations have made far greater advances than have we. (It would also facilitate my access to Los Angeles Angels of Anaheim games but I don’t think that’s clouding my judgment. Not much, anyway.)
As for the notion that high-speed rail to Las Vegas is “unproven at best,” so was the concept of the casino megaresort 20 years ago, the Las Vegas Strip 60 years ago and the automobile itself … well, you get the idea. Heck, the printing press was an “unproven” concept once upon a time, as R-J editors may recall from the carefree days of their youth.
