Nevada is about to find out if its judges are more beholden to the constitution or political pressure.
Last Friday, Senate Minority Leader James Settelmeyer and the entire Republican Senate Caucus filed a lawsuit seeking to invalidate a tax increase passed by the Legislature without a two-thirds Senate majority.
In the mid-1990s, Nevada voters overwhelmingly approved a constitutional amendment making it harder to raise taxes. The amendment requires a two-thirds majority in both house or a popular vote to pass bills that increase revenue.
Democrats have a two-thirds majority in the Assembly but are one vote short in the Senate. That presented them with a problem. Gov. Steve Sisolak and Democrats wanted more to spend.
It wasn’t that Nevada had a fiscal shortfall. Far from it. Legislators had a record amount of tax revenue to spend. But in government, more is never enough.
Rather than compromise with their Republican colleagues, Democrats sought to run roughshod over Nevada’s constitution. The Modified Business Tax, a payroll tax paid by small and large employers, was scheduled to decrease slightly. Democrats decided to extend the current rate, which is projected to generate around $100 million.
Because the rate stayed the same, Democrats argued the bill didn’t require a tax increase. In a tortured legal opinion, the Legislative Counsel Bureau agreed. That finding overturned eight years of precedent. In 2011, 2013 and 2015, the LCB had required a two-thirds vote on similar tax extensions.
This is where it’s helpful to see what the constitution says, not what politicians wish it would say.
“An affirmative vote of not fewer than two-thirds of the members elected to each House is necessary to pass a bill or joint resolution which creates, generates, or increases any public revenue in any form,” Article 4, Section 18 reads.
The LCB asserted that, because the rate a business will pay doesn’t change, it’s not a tax increase. Notice the difference between that contention and the constitution’s focus on if a bill increases revenue or not. Democrats passed this tax extension precisely because it gave them more tax revenue to spend. That means it required a two-thirds majority.
Democrats don’t have the law on their side, so expect them to ratchet up the political pressure by focusing on how this money is earmarked for education. That doesn’t change the procedural requirement.
Nevada voters imposed a high bar on tax increases. Bravo to Senate Republicans for seeking to enforce that standard. This tax increase didn’t earn enough votes to pass constitutional muster.