Las Vegas Sun

November 27, 2015

Currently: 49° — Complete forecast

Nevada Territory

Nevada tax could face same constitutional hurdle as Perry’s Texas tax

As Nevada businesses and labor try to form a coalition to advocate a broad-based business tax, there's another potential wrinkle - the Nevada Constitution.

Nevada Democrats based the "margins tax" they unsuccessfully proposed during the 2011 session on a Texas tax, passed in 2006 with the support of Gov. Rick Perry. Gaming, labor and other interests are looking at putting the tax in front of voters in 2012.

With Perry announcing his bid for the Republican presidential nomination on Thursday, expect supporters of the Nevada tax to use the Texas governor to dampen conservative opposition.

But as attorney Josh Hicks notes on his blog "Of Note Nevada", the Texas tax is being challenged as unconstitutional, and a Nevada version could face the same legal scrutiny. Texas, like Nevada, prohibits a personal income tax in its constitution.

Hicks, former Gov. Jim Gibbons' chief of staff and former general counsel to the governor, said a Texas company challenged the margins tax "because it is (1) a thinly disguised income tax and (2) the individual income of each partner is their share of partnership profits which is being taxed."

Nevada also has a prohibition on an income tax on individuals, although it specifically allows a tax on businesses.

Article 10 of the Nevada Constitution reads like this:

"No income tax shall be levied upon the wages or personal income of natural persons. Notwithstanding the foregoing provision, and except as otherwise provided in subsection 1 of this Section, taxes may be levied upon the income or revenue of any business in whatever form it may be conducted for profit in the State."

But with the U.S. Supreme Court ruling corporations have similar rights to political free speech as individuals, bet money that the anti-taxers would challenge anything that smells like a corporate income tax using a similar argument.

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy