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January 24, 2018

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Judge invalidates business tax initiative for allowing ‘tax vigilantes’

A Carson City judge invalidated a petition for a proposed business tax today for violating a state law that ballot initiatives must adhere to a single subject.

The ruling will at least delay efforts to start collecting signatures to qualify the $850 million a year “margin tax” for the 2013 Legislature.

District Court Judge James Wilson ruled that a provision of the proposed initiative that would force public disclosure of how much companies paid on the tax would create “margin tax vigilantes” and run counter to confidentiality laws on taxes the Legislature has passed. That, Wilson ruled, was not directly related to the overall purpose of the initiative.

Last week, supporters of the “Education Initiative” said the disclosure provision was not essential to the initiative.

Proponents will refile the initiative by the end of the week with the provision removed, said Gary Peck, executive director of the Nevada State Education Association, which is spearheading the effort.

He said they are confident the new petition will withstand legal challenges and the group will collect enough signatures to qualify it for to go to the Legislature. The NSEA, which is the state’s teachers union, and AFL-CIO, the state’s largest labor umbrella group, have to collect more than 72,000 signatures by Nov. 13.

If that happens and the Legislature does not pass the measure in 2013, it would go on the ballot in 2014.

The initiative would impose a 2 percent tax on gross income over $1 million a year, after some deductions. It is estimated to raise $850 million a year.

The initiative is being pushed by the Nevada State Education Association — the state teacher’s union — and AFL-CIO, the state’s largest labor umbrella group. It would impose a 2 percent tax on gross income over $1 million a year, after some deductions. It is estimated to raise $850 million a year.

Wilson’s ruling rejected most of the opponents objections to the initiative. It upheld the description of effect, which opponents said was misleading. The tax is billed as a boon to education, but the Committee to Protect Nevada Jobs, a coalition of business interests, argued that the money raised from the tax could be used for other purposes by the Legislature.

Wilson found that the description “is not the best possible statement” of the initiative’s intent, but was “straightforward, succinct and nonargumentative.”

The provision of the initiative that relates to disclosure was written into it when the effort was being led by the state’s AFL-CIO, according to a source with knowledge of the process.

James Penrose, attorney for the NSEA, said that the provision was meant so that the public could watch for any companies that might under-report the tax.

Besides upholding the description of the initiative that is at the top of every page carried by signature gatherers, Wilson also ruled that the $5 million raised by an increased tax on financial institutions, to pay for the state’s collection of the tax, was valid.

The Nevada State Education Association and Committee was not immediately available for comment.

The Committee said in a statement: “We are pleased with Judge Wilson’s decision to invalidate the margin tax petition.” It said it would continue to oppose efforts to impose the “onerous” tax.

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