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April 17, 2014

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state budget:

One man’s campaign to upend Nevada’s tax structure

Lawsuit to be initial step in attorney’s effort to wrest control of Nevada’s revenue allocation from lawmakers

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Steve Marcus

Eminent domain lawyer Kermitt Waters fights government efforts to take private land and strongly promotes the process of citizen ballot initiatives to “protect the people.”

A Las Vegas attorney will launch a legal and political effort this week aimed at establishing and funding a parallel state budget, beyond the reach of the Legislature and governor.

Kermitt Waters seeks to place on the November ballot a proposed constitutional amendment calling for a sweeping overhaul of Nevada’s tax system — abolishing property taxes on single-family homes among other things while identifying and allocating new tax revenue.

Waters said last week his proposal is borne of frustration with the status quo in Carson City. The state’s 63 lawmakers represent the powerful interests who fund their campaigns, he said, not the voters who elect them.

“The people of Nevada don’t have a Legislature. Mining and gaming have a Legislature,” Waters said. “If the Legislature could get their hands on this money, none of this would ever happen.”

Waters will begin his effort in the courts, where he says he will file suit this week targeting the law that limits citizen initiatives to a single subject. That restriction would prevent his sweeping tax proposal from reaching the ballot. He will ask that the so-called single-subject law be eased or overturned.

Should he succeed in court and then gather enough signatures for his proposal to win a place on the ballot, voters would consider an initiative that would remove property taxes on single-family homes, and institute a 20 percent levy on mining and a gross-receipts tax on businesses with revenue of over $1 million a month. Gaming companies and nonprofits would be exempt, as well as food for home consumption.

Revenue raised from the new tax structure would first reimburse cities and counties for lost property tax. The remainder of the money would be held in an account separate from the state’s general fund and allocated to:

• Establish an appeals court to ease the Nevada Supreme Court’s massive case load and fund the state judicial system;

• Provide raises of up to $10,000 for elementary, math, science and computer teachers and raises of up to $5,000 for other public school teachers;

• Fund road improvements;

• Provide no-interest loans for homeowners to purchase solar panels or windmills, and fund large-scale renewable energy and water projects, including desalination plants outside Nevada to facilitate water swaps;

• Replenish the Millennium Scholarship fund;

• Fund improvements to the initiative process, including systems to allow signature-gathering via the Internet; and

• Provide health care for poor children.

• • •

Few in Nevada are better situated to propose a long-shot ballot initiative to upend the establishment.

Waters helmed the last successful initiative petition in Nevada — 2006’s People’s Initiative to Stop the Taking of Our Land, or PISTOL, which placed eminent domain rules in the state constitution, protecting property owners when government takes land for public use.

“This will keep the rich from robbing the poor,” he told the Sun at the time. (The measure, with some revisions, passed a second time in 2008.)

As an eminent domain attorney, Waters is accustomed to fighting city hall — sometimes literally — and has gotten good enough at it to make himself wealthy. That money, however, appears to have left intact a working-class worldview and outrage at the state’s establishment, which he says “runs the state like a plantation.”

At the same time, Waters, a registered Democrat, has been in and around government and politics long enough, and had enough success, that he can’t be dismissed as a gadfly or blind ideologue. Bob Fulkerson, director of the liberal Progressive Leadership Alliance of Nevada, once described Waters as “a classic Nevadan who holds libertarian and progressive values in the same hand.”

Waters’ experience with PISTOL and observing numerous ballot-initiative failures since then has convinced him that citizens will never have access to the lawmaking process until the single-subject restriction is overturned or loosened.

Waters’ lawsuit goes straight at it, seeking to overturn the 2005 law, Senate Bill 224, which contains the single-subject requirement. The suit also targets a law passed by the 2011 Legislature, Assembly Bill 81, which also deals with initiatives. Those measures, the suit states, “increase the time and costs associated with circulating initiative petitions and, therefore, serve only to restrict direct democracy and protect special interest.”

According to the lawsuit, the laws themselves violate a single-subject requirement in the state constitution (Article 4, Section 17), which applies to bills in the Legislature. The 2011 law, for example, deals with more than 30 subjects and amends more than 50 statutes, according to the lawsuit.

Waters is hedging that the courts will be forced to either rule that citizen petitions should be judged by the looser standard applied to state lawmakers or toss out the laws in question, taking off the books the single-subject requirement.

Because the single-subject standard has been so “arbitrarily and narrowly interpreted” in court, in effect preventing all initiatives from reaching the ballot since 2005, “the same standard of limitations, expressed in the state constitution, must likewise encumber the Legislature.”

“They treat this single-subject law as a legal question, but it’s really a political question,” Waters said. “If the judges like a petition it gets on the ballot, if they don’t it doesn’t.”

The defendant named in the lawsuit is Secretary of State Ross Miller, the state’s top election official.

To place his initiative on the ballot, Waters must collect 72,400 signatures, including 18,000 from each of the state’s four congressional districts, by June 19. Waters said he will argue for an extension because the drawn-out redistricting fight caused an undue delay in knowing where those signatures should be gathered.

For his tax plan to be written into the state constitution, voters would have to approve it twice.

• • •

Although the legal strategy is somewhat opaque, Waters’ political strategy is clear: give homeowners financial relief while going after mining, the state’s only prosperous industry in the recession and one that pays relatively little in taxes for the minerals it extracts from Nevada soil.

Public opinion polling shows most Nevadans think mining’s constitutionally set tax rate of 5 percent is too low. The industry’s effective tax rate is lower once deductions are included.

“Their greed is so obvious to anyone who’s aware of what they’re doing,” Waters said of the industry. “Most of the money is going to Canada and Europe, and we’re getting none of it.”

In justifying a 20 percent mining tax, Waters cites Australia’s 30 percent levy on multinational mining companies.

Untouched in Waters’ proposal is gaming, which has been harder hit in the recession. That, too, is a political calculation, not a sympathetic gesture.

“I’m exempting gaming because I can’t fight them both,” Waters said, referring to gaming and mining.

However, Waters’ effort will be seen as a broad swipe at Nevada’s political establishment, which is accustomed to having its way in the Legislature.

Giant retailers will line up to oppose the gross receipts tax as they have when similar measures have been floated in the Legislature. Provisions to make solar panels and wind power more accessible to homeowners and fund renewable energy projects will likely be opposed by the state’s powerful electricity monopoly, NV Energy, and the easing of the ballot initiative process could be unnerving to any number of industries, including gaming.

But Waters may find an ally in the courts. His proposal to create an appeals court and provide an independent funding source for all state courts will likely be well received by the judiciary, which now goes to lawmakers to plead for funding. It’s an arrangement many see as a violation of the separation of powers.

• • •

Waters said he knows he’ll face heavy opposition from the establishment. Some will question whether the effects of such a sweeping overhaul of state government can be anticipated. Others will argue any such undertaking should be done in the Legislature, where there can be more deliberation and open study.

(Waters said he has vetted his proposal with three economists, whose names he won’t divulge.)

He acknowledged there would be unintended consequences. The proposal allows for adjustments to be made 10 years after it’s adopted, or sooner through the courts.

Waters said one effect of his plan would be a sort of economic stimulus. Funding for renewable energy projects would create jobs. The money for teachers and scholarships would improve the state’s education system, which is often cited as an economic Achilles heel.

“This will raise a lot of money, and there will be unintended consequences, but they won’t amount to a hill of beans,” he said. “This is what everybody’s been talking about, a broad-based tax.”

Waters learned last week that Democratic and Republican operatives are planning less-ambitious ballot initiatives to alter the state’s tax system. Labor leader Danny Thompson has promised a business margins tax initiative, and conservative businessman Monte L. Miller is reportedly working on one petition to raise the gaming tax and another to raise the mining tax.

Waters said those efforts won’t confuse voters. In fact, he said, they confirm the need for the kind of overhaul he proposes.

“Those proposals reflect on the absolute failure of the Legislature to do their job,” he said. “With several of us doing it, it proves there’s truly a need to get this fixed, but the Legislature has been totally captured by the power brokers.”

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  1. Good luck, Kermitt. Reining in the creepy-crawlers in Carson City is fine with me. However, I am opposed to raising taxes based on the premise that "you make too much and can afford to pay more." That's not capitalism, it's Marxism, a philosophy I abhor.

  2. Where do I sign? It's time for the gang of 63 to lose their grip on Nevada once and for all.

    They have "forgotten the face of their father".

  3. -Lets see, tax mining, Check.
    -Improve education, Check.
    -Health care for poor children, check.
    -No interest loan for renewable energy, which will create more jobs, check.
    -More pay for teachers, check.
    - Put the Nevada legislature in check, CHECK!
    This sounds to good to be true. I'm very interested in who opposes this.

  4. Fee simple for property taxes is a much better system than the "replacement cost" system backed up by Marshall and Swift insurance costing schedule.

    Nevada's property tax scheme(the only system of its kind in U.S.) could only be devised by criminals.

    NV property tax system is based on guilty until proven innocent, administered by county and state Boards of Equalization who have no power to do anything except check the fault numbers and arguments put forward by county assessors?

    How many more NV Supreme Court decisions calling NV property taxes system unconstitutional without providing a remedy do we need?

  5. If anyone thinks that a bill is discussed openly and honestly in our legislature, they have not gone to Carson City. (It is a closed loop.) I will agree with some of the presentation in his proposal, but it is not all good. A deciding factor is, if Bob Fulkerson has an opinion, it usually is not favorable for the good of the people. Usually. And, by the time it is a ballot measure, it is not anything like the intended.

  6. Mining has never paid a proper tax. Forget fair share and hone in on the fact that big mining takes the minerals for a ridiculously tiny tax and, then walks away with a piece of land berefit of minerals that Nevada used to own but gave away to the mining companies for a pittance. The big miners have done this in most western states since they showed up with hydraulic mining and dredges to obtain the minerals. Legislatures have rolled over on their backs in every situation I have heard of when Miners money talks.

  7. If anyone has ever been a victim of "eminent domain," (my sister and her husband were in CA while she was having chemotherapy!), and anyone with an ounce of common sense understands that all of the governing bodies in this country are "owned" by special interests, EVERY common citizen (99%) should get behind this effort as a starting point to finally put power back into the voter's hands.

    "Special Interest Groups" is a fancy name for Wealthy Rapists who buy the legislature to create laws that make what they do legal and lucrative. They are the PIMPS, the elected representatives are their whores.

    Mr. Waters, put up a website where all of us with an interest in moving this type of action from Nevada to Washington can get involved. Something has to be done before this country implodes like an old casino whose owners sucked the money out of it and let it die in the desert heat.

  8. Waters is definitely onto something here. Government exists for We the people, not the other way around.

    "Where do I sign?"

    geezelouise -- if you meant "Where do I sign up?" I'm with you on this one

    "If anyone thinks that a bill is discussed openly and honestly in our legislature, they have not gone to Carson City. (It is a closed loop.)"

    dhenry -- sadly that's the case almost everywhere. The flip side is how much do you personally participate in the lawmaking process? The legislature has a job to do, the committee hearings are open to the public to weigh in on any bill. If no one shows up but the suits to steer it in a certain direction they really can't be faulted for passing bills the way they do.

    "Mining has never paid a proper tax."

    Malous -- that's because it's written into the Constitution.

    I have to wonder what Waters' opinion is on foreclosures. In non-judicial foreclosure states like Nevada, it's a lot like eminent domain.

    "We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force." - Ayn Rand (1905-1982)

  9. Power to The Peeps...

    Power to the peeps, RIGHT ON!

    "The people of Nevada don't have a Legislature. Mining and gaming have a Legislature," Waters said.

    It's time to bring Nevada into the 20th century...the 21st century would be good,too...but we are stuck in the freaking 19th century!

    'That's the way it's always been since Mining & Gaming wrote the dadburn State Constitution back in 18 & 64, by God, and that's just the way it is, 'cause we are as stubborn as a pack of ol' MULES, and just about as smart.'

    You go, Mr. Rogers! Just tell us where to sign.

    Crazy?
    Nope.
    Crazy like a Fox?
    Maybe.

  10. Two signatures here!

  11. While property taxes have never made any sense, they are not very high on houses.

    Instead of raising taxes, why doesn't he find things to cut?

    Does he think the miners do not have options, such as moving operations elsewhere? Would the products of the miners still be competitive with the output of otehr mines after the new tax?

  12. It is thrilling to hear of Mr. Waters! The People of Nevada are now willing to unite towards this cause. The People have suffered by the hands of LAWMAKERS, and have been exploited without mercy, for over a century by individuals bought by the Mining industry. By far, Mining (by foreign held corporations) has paid a pittance for extracting Nevada's NON-renewable wealth for 150 years.

    Blessings and Peace,
    Star

  13. If they made one change, it'd be better:
    Add a flat income tax (exempt the first $100,000 of income) and reduce the sales tax.

    My big concern though is that this takes away the ability of local governments to levy taxes themselves and further puts them in the pocket of the state. I'd also like to remove municipal responsibilities from Clark County (whether that means the expansion of current cities or the creation of new ones). Streamlining government will save money, too.

  14. I'll be looking to sign the petition. Everything is on the table.

  15. "Does he think the miners do not have options, such as moving operations elsewhere?"

    really? lol --- the gold is here, how would you move that?

    simple fix for the mining industry --- pay tax on the amount of income they report to their share holders --- not the make believe numbers they give to the state. this would also save mining some $$ since they won't have to make up two sets up numbers to report.

  16. Our state motto should be: Serving the mining industry with a third world political and tax structure since 1855.

    They get better deals here than they do while priming the pump with generous donations to a politician's bank account Burma.