Las Vegas Sun

January 22, 2018

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Business group challenges Nevada tax initiative

Lynn Warne

Lynn Warne

A coalition of business groups petitioned a Carson City judge Tuesday to throw out labor unions’ initiative to impose a business tax, arguing that it would not necessarily increase funding to education as proponents claim.

The Committee to Protect Nevada Jobs also said that a provision that would force businesses to publicly disclose how much of the "margin tax" they paid set a new precedent in Nevada that usually keeps tax payments confidential.

District Court Judge James Wilson made no decision on Tuesday on "The Education Initiative" but said he'd have one "as soon as possible." Wilson and attorneys for both sides expect the any decision to be appealed to the Nevada Supreme Court.

"The Education Initiative" is a petition filed by the Nevada State Education Association, with the backing of the AFL-CIO, to impose a "margin tax" on 2 percent of business' gross earnings over $1 million. The tax, based on a failed Democratic proposal during the 2011 legislative session, will raise an estimated $850 million a year, according to teachers union President Lynn Warne.

Business groups and conservatives have rallied against the initiative. The Committee to Protect Nevada Jobs, which is suing to have the statutory initiative dismissed, is made up of the Las Vegas and Reno/Sparks chambers of commerce, retailers, trucking, and Nevada Taxpayers Association. Las Vegas Sands has also joined the coalition, but other gaming companies have been neutral, as have mining companies.

Warne, the president of the Nevada State Education Association, was confident that despite the legal delays there was enough time to collect 72,000 signatures. People, she said, "want stable funding for education."

She declined to disclose how much money the group planned to spend on gathering signatures, which have to be submitted by Nov. 13.

The Committee to Protect Nevada Jobs argued the description of effect on the "Education Initiative" is deceptive and violates the rule that initiatives have to adhere to a single subject.

In particular, money raised from the tax could be used for other things, said attorney Josh Hicks.

In press releases, the description of effect and even the title of the initiative, voters are led to believe the tax will be a direct boon to education, Hicks said.

"You’re certainly led to the impression that this initiative will somehow be supportive of education, and K-12 education in particular," Hicks said. But, he said, "The Legislature could spend the additional money in any area. It completely runs counter to the bold-faced title."

Attorney Jim Penrose, representing the Nevada State Education Association, said the money would be deposited in the distributive school account.

But the NSEA's Warne conceded that the additional money could be shifted around and spent on other things. "It could be back-doored out," she said.

If supporters collect enough signatures, it will go to the 2013 Legislature, where it will need a two-thirds majority to pass. If it fails there, it will go to the voters in 2014.

Warne said the group will not start collecting signatures until after Wilson's ruling, but might before a final determination by the Nevada Supreme Court.

Wilson peppered Penrose, the teachers' lawyer, with questions. He asked if it was true that businesses that were not making money would still have to pay the tax. "That could be the effect, yes," Penrose said.

Wilson also questioned why the taxes were being made public.

"What’s the purpose of making available the names of the entities and the amount they pay?" Wilson asked.

Penrose said it would provide public oversight and "those who evade taxes can be brought to account."

The coalition also argued that the amount of money that would be generated for administrative costs, $5 million in the first biennium, fell short of legislative estimates. The administrative costs would be paid for by increasing the payroll tax on banks.

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