Published on: November 13, 2024, 04:34h.
Last updated on: November 13, 2024, 04:34h.
Red Rock Resorts (NASDAQ: RRR) executives are optimistic that the proposed no tax on tips policy from the 2024 presidential campaign could significantly boost the Las Vegas economy by up to $200 million.
This idea was originally proposed by President-elect Donald Trump and later endorsed by his Democratic rival, Vice President Kamala Harris. This proposal may have played a significant role in Trump’s victory in Nevada, making him the first Republican presidential candidate to win the state in two decades, with 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 on 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, which represents hospitality workers, supported Harris in the election and is in favor of eliminating taxes on tips.
Removing Taxed Tips Could Benefit Red Rock
Some experts believe that implementing the elimination of taxes on tips could face challenges, such as many tipped workers being in low-income brackets where they’re already not subject to much federal income tax, and the potential loss of revenue during a period of high deficits. This may hinder the policy from being realized.
However, if the Trump Administration successfully pushes Congress to eliminate levies on tips, Red Rock could be a major beneficiary. With all of the operator’s gaming venues located in the Las Vegas Valley, many of its loyal customers are hospitality workers from other properties.
The estimated $200 million boost mentioned by Fertitta could have significant implications for the Las Vegas economy and would likely extend beyond the gaming sector. It could also benefit competitors of Red Rock, such as Boyd Gaming (NYSE: BYD) and Golden Entertainment (NASDAQ: GDEN), both of which operate popular gaming venues among Las Vegas locals like Red Rock’s.
“No tax on tips, I think would be a positive for our business,” said Red Rock President Scott Kreeger on the conference call.
Additional Benefits for Red Rock and Others
If the no tax on tips policy is implemented, Red Rock could see incremental benefits in other areas as well. Prior to the election, some analysts speculated that the casino operator could save as much as $3 million annually in payroll expenses if tip taxes are eliminated.
During the conference call, CFO Stephen Cootey echoed this sentiment, stating that Red Rock could potentially save $2 million to $3 million in annual payroll expenses if taxes on tips are eradicated.
If this projection holds true, competitors like Boyd and Golden could also experience payroll expense benefits.