CARSON CITY — Nevada Supreme Court justices asked pointed questions Monday on whether an effort to repeal the state’s new business tax is legally sound to proceed in the signature gathering process.
Attorneys for a business coalition that supports the commerce tax passed by the 2015 Legislature and signed by Gov. Brian Sandoval are trying to keep the repeal referendum from making it to the November general election ballot.
But a group called RIP Commerce Tax led by state Controller Ron Knecht argues the tax imposed on businesses with $4 million or more in annual Nevada revenue should be left to voters to decide.
The commerce tax, estimated to generate $60 million in annual revenue for the state budget, was part of a $1.5 billion package of new and extended taxes enacted largely to fund the governor’s ambitious public education agenda.
Craig Mueller, attorney for the commerce tax opponents, said the levy is an affront to voters who overwhelmingly defeated a margins tax proposal in 2014.
“This issue here is direct democracy and whether or not we’re going to allow it to happen,” Mueller said.
Matt Griffin, arguing for the Coalition for Nevada’s Future, told justices the referendum is confusing, improperly imposes administrative procedures and violates law that requires legislators to pass a balanced budget.
Carson City District Judge James Wilson in December rejected the coalition’s arguments and allowed the effort to proceed, prompting the appeal heard Monday by the high court.
Approval would “throw the state budget out of balance,” Griffin said, yet the referendum does not tell voters how that revenue gap would be addressed.
Mueller countered revenue from the tax is minuscule and the Legislature could deal with any funding gaps when it convenes in 2017.
But Chief Justice Ron Parraguirre questioned why a citizen effort should be any different than balanced budget requirements imposed on the Legislature.
“Why should people have any superior power than the Legislature?” he asked.
Griffin also said the referendum is flawed because it cites the language of Senate Bill 483 — the legislation imposes the entire tax package — rather than statute.
“Nowhere in the petition does it say what statute is being proposed” for repeal, Griffin said. “It’s their responsibility to submit a petition that is not confusing.”
That point seemed to bother Justice Michael Douglas, who asked Mueller, “Is this not confusing to the average person?”
Justices gave no indication on how they will rule but Parraguirre acknowledged the time constraints and indicated a decision would come as quickly as possible.
After the hearing, Knecht said volunteers have collected about 20,000 signatures. They need to gather about 55,000 by June 21 to qualify the referendum for the November ballot.
If voters repeal the tax, it is wiped from the state law. But if the repeal effort fails at the ballot box, the commerce tax would become enshrined in state law, a so-called super-statute that could only be changed by a public vote.
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