Attorney offers a glimpse of the future of the commerce tax

Craig Mueller, the attorney for a group seeking to repeal the 2015 commerce tax calling themselves RIP Commerce Tax, argued before the state Supreme Court today that the group should be allowed to collect signatures and have the repeal placed before the voters in November.

Nevada Controller Ron Knecht is heading up the repeal effort.

Though it is hardly a legal argument, as one justice told him, Mueller spelled out a strong political argument against the commerce tax:

When the federal government first proposed an income tax in 19 aught 6 or so, I don’t remember the exact year, it was supposed to be on millionaires, on the edge of the Golden Age. A hundred years later, everyone pays income tax.

Now, the two things I’ve noticed about government, it never gets any smaller, taxes never go down.

Now I hate to be cynical about these things, but those are a simply statement of facts. My clients are very concerned about that trend and very concerned they don’t have their say on this tax.

Just moving the dial forward another 10 or 12 years, this tax goes down 4 million dollars to 3 million to 2 million and it starts to looking an awful lot like a state income tax.

Mueller also noted that the voters turned down a gross receipts tax — identical to the commerce tax in principle if not in specifics — in November 2014 by a margin of 4-to-1. The Legislature passed the commerce tax with the required two-thirds majority and the governor signed it.

Nevada Assistant State Controller Geoffrey Lawrence, left, and Controller Ron Knecht present an alternative to Gov. Brian Sandoval‘s tax plan in May. (R-J photo)

The Coalition for Nevada’s Future argued the petition should not be allowed to go forward because its language is confusing and its form does not conform strictly with legal requirements. They also argue repeal would unbalance the state budget. The state Constitution requires a balanced budget.

Mueller noted the tax is expected to raise only $60 million a year as currently written and the interim finance committee has handed much bigger shortfalls in the past due to economic slumps.

The commerce tax would impose a gross receipts tax on all businesses grossing more than $4 million a year. It has different tax tables for 27 different industries — ranging from a low of 0.056 percent for mining to a high of 0.362 percent for rail transportation in 67 different levels of revenue. And there is nothing to prevent future legislatures from ratcheting up those rates or lowering the threshold.

One of the complications of the ballot measure is that if the voters allow the tax to stand as written, some argue the Legislature would not be able to alter it in any way without a vote of the people. If the people repeal, lawmakers could not impose a similar tax without a vote of the people.

Carson City Judge James Wilson earlier ruled, “The court concludes even if the Legislature enacts a statute, the people do not lose their constitutional right to submit the statute to a vote of the people.”

The justices should rule fairly soon because the group has a deadline of June 21 to collect enough signatures.

Newspaper column: Whether you get to vote on tax hike will be up to the courts

One of these days, perhaps, you will be able to go online and download and sign a petition calling for the repeal of the $1.4 billion in tax hikes — a nearly 17 percent increase in state spending — approved by your Republican-majority Nevada Legislature and signed by your Republican governor just months after the voters rejected two tax hikes at the ballot box — one of them by a margin of 4-to-1.

Earlier this summer a group calling themselves the We Decide Coalition filed such an initiative with Republican Secretary of State Barbara Cegavske, asking that the matter go before the voters in November 2016.

The filing included a verbatim copy of the 100-page Senate Bill 483, which created a commerce tax (similar to the voter-rejected margin tax), hiked the cigarette tax $1 a pack, adjusted the payroll tax, made permanent certain “temporary” taxes, hiked business license fees, changed taxes on mining (a version of which was also rejected by voters), etc.

Knowing full well the initiative would be challenged in court because it addressed more than a single subject as required by law, a legislative land mine that has blown up many a petition effort, the group filed a pre-emptive lawsuit asking that the petition be declared a single subject because it addresses only one bill or, in the alternative, that SB483 be jettisoned as unconstitutional.

Brian Sandoval

The state Constitution requires: “Each law enacted by the Legislature shall embrace but one subject, and matter, properly connected therewith, which subject shall be briefly expressed in the title …”

Repeal proponents point out that SB483 amends 41 chapters and hundreds of sections, and amends, adds or deletes more than 87 separate freestanding sections of state law.

The status of that lawsuit is unclear since a group calling itself the Coalition for Nevada’s Future filed another suit in another state court challenging the legal standing of the petition over the single-subject law and over its “Description of Effect” filed with the repeal effort. Instead of describing the effect of repealing the law or letting it stand, the We Decide Coalition simply cut and pasted SB483’s title.

The suit points out that Nevada law “requires that an initiative petition set forth, in not more than 200 words, a ‘description of the effect of the initiative or referendum if the initiative or referendum is approved by the voters.’ The purpose of the description of effect is to help prevent voter confusion and promote informed decisions. The description of effect cannot be materially misleading, nor fail to identify the consequences of a referendum’s passage, and it must be straightforward, succinct, and nonargumentative.”

Chuck Muth

One of the instigators of the petition, Chuck Muth, conceded the latter point and said the group plans to refile its petition with a new and improved description of effect.

Once that is done, the other coalition is expected to file suit against that petition and start the whole process over again.

There is a possibility somewhere along the line that someone might raise the issue of whether every state judge has a conflict of interest. Were the voters to get a chance to slash the state budget by nearly 17 percent, who knows where the cuts in spending might trickle down. To the courts, perhaps? But it is hard to see how federal courts could have jurisdiction in what are basically conflicts under state law and constitution.

Gov. Brian Sandoval has promised to fight the repeal effort tooth and nail, calling the petition “a wrongheaded attack on the children and families of Nevada. Supported by more than seventy percent of legislators, the revenue the petition seeks to eliminate will go directly to the classroom and give teachers the resources to deliver a quality education.”

Of course, the governor fails to note that the state has increased education spending 80 percent per pupil, adjusted for inflation, over the past 40 years with no detectible effect on student test scores.

More than a few legal knots will have to be untangled before we find out whether the voters themselves will get a chance to say whether they agree or not with this massive increase in spending and taxation.

A version of this column appears this week in the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel, the Lincoln County Record and the Sparks Tribune — and the Elko Daily Free Press.