MGM Mirage Chairman Terry Lanni has quit the board of directors of the American Gaming Association in what is being reported as a feud with Harrah’s Chief Executive Gary Loveman over a state teachers union proposal to raise the tax on hotel rooms by 3 percent to fund pay raises for teachers and other improvements to Nevada’s ailing public school system. What Lanni wants instead is an increase in the state’s payroll tax. But it’s more than that. He’s opposed to earmarks in principle. Above all he opposes any levy that appears to target the casino industry exclusively.

These philosophical squabbles come up every time Nevada runs into money problems and talk turns to raising the direct tax on gaming revenue. The last time, in 2002-03, MGM Mirage quit the Las Vegas Chamber of Commerce because it wouldn’t agree to the company’s alternative proposal for a business-wide gross receipts tax. This time the chamber is keeping silent. The Nevada Taxpayers Association, which also was a factor in thwarting MGM on the gross receipts tax, opposes an increase in the payroll tax, saying it will devastate small business.

Not surprisingly, Lanni denies the existence of any conflict. He told the Las Vegas Sun, “I needed time from the AGA to focus on trying to find a solution to the bigger problems of this state.”

If this sounds a bit bizarre to you then you’ve never lived in Nevada, where the guy whose official job is to find solutions to the state’s problems had to call the part-time Legislature back to work last month for an emergency “special session” because the state is staring down its worst fiscal crisis since the Great Depression and her lawmakers have been on hiatus since June 2007. This is not to say that Gov. Jim Gibbons or anyone actually serving as a representative of the people is espousing tax increases. Rather what Lanni was speaking to, quite unselfconsciously it appears, is a political establishment accustomed to leaving to the private sector all knottier matters relating to the public’s business. This proceeds from a belief more or less deeply held that the private sector knows best. It’s a boom town mentality grounded in notions of rugged frontier individualism and in the fact that the private sector doesn’t have to worry about getting re-elected. It’s Libertarian in its soul. Taxes are bad because they stifle economic growth, growth being an unqualified good, an idea to which nouveau riche types are in thrall because it fosters the illusion that they steer the ship of prosperity.

What this means for all intents and purposes is that it’s up to the casino industry, the 800-pound gorilla of private-sector Nevada, to solve the current crisis. Of course the industry knows that like it or not somebody’s going to pay more taxes, in Nevada the dirtiest of four-letter words but one that must be spoken in the context of a $1 billion-plus budget deficit — of the 29 states facing shortfalls for the 2009 financial year the third-largest as a percentage of general funds. The governor, Bush Republican that he is, hates taxes like the devil. He’s for cutting more than $900 million from the budget. Along with everything this implies in terms of the state’s ability to provide necessary services, educate its children and maintain its roads, bridges and other critical infrastructure, it cannot be the answer. As Lanni himself said, “We’ve got a gushing wound. Let’s not try to justify putting a Band-Aid on it.”

The one thing the casino bosses do agree on when it comes to taxes is they don’t like them either. It was the teachers union’s big idea to tax the state’s largest industry in an attempt to lift up a school system whose performance consistently ranks at or near the bottom of the nation and is sure to get worse as the industry throws up more multibillion-dollar pleasure domes and more families migrate to Las Vegas to work in them, not to mention the added pressure this places on overburdened social services and a creaking infrastructure. But in Nevada you don’t go into gaming’s pocket unless gaming says it’s all right, and in the 20 years since Ronald Reagan retired gaming has said that only once, that was during the 2002-03 crisis, and the upshot was an increase in the revenue tax of half a percentage point to 6.75 percent, still the lowest rate in the country by far, perhaps the lowest of any legitimately regulated gambling jurisdiction in the world. The union’s big idea a year ago was to frame a 3 percent increase as a ballot question. Polls at the time indicated it would pass. But the other thing you generally don’t do in Nevada unless the casinos agree is go around asking the voters what they think.

What’s compelling about the room tax increase in theory is it shifts the problem onto the tourists. In the current economic downturn, with occupancy rates sagging, it could turn out to be more complicated than that. Still, Lanni says he’s prepared to swallow a 2 percent increase if the money goes into the General Fund and not directly to education and provided a portion of the tax that goes to the Las Vegas Convention and Visitors Authority is also diverted to the General Fund. Las Vegas Sands Chairman Sheldon Adelson, who owns the competing Sands Expo Center, has been touting that for years. He hates having to indirectly subsidize his rival.

So the industry is all for acting responsibly when it makes business sense to them. The only thing Nevadans can do is hope they find a way.