Legislative Democrats moved closer last week to a budget debacle involving the state constitution and tax increases.
On Thursday, the Assembly Taxation Committee, on a party line vote with all Republicans opposed, forwarded Assembly Bill 538 to the full chamber. The proposal scuttles a scheduled reduction in the payroll tax paid by Nevada businesses. That would raise about $100 million over the next two years, money integral to funding Gov. Steve Sisolak’s budget.
Under Nevada law — imposed in 1996 by state voters through the Gibbons Tax Restraint Initiative — any bill in Carson City that “creates, generates or increases any public revenue in any form” must pass with a two-thirds majority in both houses of the Legislature. Democrats enjoy such dominance in the Assembly, but they are one vote shy of a supermajority in the state Senate, and legislative Republicans are in no hurry to sanction a tax hike.
Recognizing the conundrum, the governor and his Democratic allies in the Legislature argue disingenuously that AB538 does not raise taxes, it simply extends current rates. This is a position of pure political convenience. In previous sessions, Democrats have recognized that bills abolishing tax sunsets do indeed require two-thirds support if they are to pass constitutional muster. It’s basic logic that even most attorneys can grasp. If AB538 fails, the state will have $100 million less to spend over the next biennium. Ergo, AB538 “generates or increases … public revenue” and is subject to the two-thirds requirement.
Nevertheless, majority leaders sought a nonbinding opinion from the Legislative Counsel Bureau — which provides legal advice to lawmakers — on the matter. To nobody’s surprise, the LCB this month provided Democrats the cover they craved, a long-winded and tortured 24-page exercise in evasion that would have made Humpty Dumpty proud, purporting to show the plain language of the Nevada Constitution on tax hikes doesn’t mean what it clearly says.
Democrats are now threatening to push the tax hike through the Senate even if they’re unsuccessful at flipping a Republican or two to meet the constitutional mandate. That approach will prompt a court challenge and is not without risk, potentially leaving the budget with a gaping hole.
Legislative Democrats insist the money raised through AB538 will fund all manner of goodness and light, particularly for Nevada schools. They will no doubt try to cast Republicans as being “anti-education” if they refuse to support killing the payroll tax reduction. But Nevada voters also might not look kindly upon Democrats who willfully flout state law to achieve a convenient outcome. Ultimately, this isn’t about what good the $100 million may do. It’s whether majority lawmakers and the governor are going to cavalierly defy a lawful restriction on the Legislature’s powers.
“If the two-thirds requirement doesn’t apply to sunsets,” Michael Pelham of the Nevada Taxpayers Association told lawmakers, “then it’s not a stretch before it gets weakened (in) other areas.”
It would be folly to predict how the Nevada Supreme Court might rule in a legal dispute involving AB538 and the supermajority provision. The court has a lengthy history of siding with the state political establishment on issues including judicial recalls, term limits and the separation of powers. In 2003, the justices — in the indefensible Guinn v. Legislature decision, later repudiated — even insisted they had the authority to allow lawmakers to suspend the two-thirds requirement during a budget impasse.
But if Gov. Sisolak and the majority leadership ignore the law and allow this dispute to go to court, they’ll be revealing a deep contempt for the Nevada voters and the very constitution they’ve sworn to uphold. If legislative Democrats can’t persuade at least one Senate Republican to support AB538, the law demands they bury the tax hike, make some difficult choices and find the $100 million elsewhere.