Red Rock Resorts (NASDAQ: RRR) executives believe that a proposed policy to eliminate taxes on tips could invigorate the Las Vegas economy by as much as $200 million.
This proposal, originally put forth by President-elect Donald Trump and subsequently supported by Vice President Kamala Harris, may have played a pivotal role in Trump winning Nevada, making him the first Republican presidential candidate to do so in two decades. He secured the state by a margin of 3.1%, or nearly 47,000 votes, according to NBC News data.
“We’ve looked at some economic analysis, not — I don’t know if anything has really been published on it,” said Red Rock Vice Chairman Lorenzo Fertitta during the company’s third-quarter earnings conference call last Thursday. “We think it could add somewhere in the neighborhood of about $200 million a year to the local economy here, which obviously we would benefit from.”
The Culinary Union, representing hospitality workers, supported Harris in the election and backs the initiative to eliminate taxes on tips. However, some experts warn that implementing such a policy could be arduous, potentially preventing it from materializing. They cite issues like many tipped workers being in low-income brackets, thus not subject to significant federal income tax, and the potential loss of revenue amidst high deficits.
If the Trump administration successfully persuades Congress to eliminate levies on tips, Red Rock could see significant benefits. All of the operator’s gaming venues are situated in the Las Vegas Valley, where many of its most frequent customers are hospitality workers from other properties. The $200 million figure mentioned by Fertitta could have broad implications for the Las Vegas economy, potentially benefiting competitors like Boyd Gaming (NYSE: BYD) and Golden Entertainment (NASDAQ: GDEN), both of which operate venues popular with Las Vegas locals.
“No tax on tips, I think, would be a positive for our business,” said Red Rock President Scott Kreeger on the conference call.
If the no tax on tips policy is realized, Red Rock could also gain incremental benefits in other areas. Before the election, some analysts speculated that the casino operator might save up to $3 million annually in payroll expenses if tip taxes are eradicated. Red Rock CFO Stephen Cootey echoed this sentiment during the conference call, suggesting the company could save between $2 million and $3 million each year if the tax on tips is removed. Should this forecast hold true, competitors like Boyd and Golden could also experience similar payroll expense savings.
