Strict compliance or dead lettering?

How much damage repealing the 2015 commerce tax on business would do to the state budget became a key point of argument before the Nevada Supreme Court today, as lawyers debated whether a repeal initiative should even go before voters at all.

Attorney Matt Griffin, representing a PAC called the Coalition for Nevada’s Future, argued that because the repeal would leave the state budget unbalanced, it was unconstitutional. And that’s true, Griffin said, whether the referendum takes 2 cents or $2 million from the budget. “That’s why we’re submitting this as a matter of law,” Griffin said.

According to Griffin, the Legislature (in Article 9, Section 2 of the state constitution) is required to balance its budget during its biennial sessions. And because the powers of the people to enact laws or repeal them is equal to the powers of the Legislature, the duty to balance the budget falls on those who propose initiatives or referenda as well, Griffin argued.

Otherwise, any group could propose the elimination of any tax, or a number of them, which could leave the state in dire financial circumstances, he said. (To be sure, Article 19, Section 6 prohibits the passage of any initiative that calls for spending money which does not also provide for a tax or other funding to cover that spending.)

But attorney Craig Mueller, representing the RIP Commerce Tax Inc. group headed by state Controller Ron Knecht, argued that the amount of money involved is small, and the Legislature’s Interim Finance Committee could easily plug any budget hole without the need to call the entire body into a special session. And this petition, unlike a separate measure that was later dropped, would repeal only the new commerce tax on business, not every tax approved by the 2015 Legislature.

Griffin also argued the repeal petition was deficient because it simply reprinted the relevant text of bill that created the commerce tax rather than identifying the specific statute that organizers wanted to put up for repeal. The constitution specifies that referenda must target “a statute or a resolution or part thereof.” Because organizers only cited the bill and not the statute, the measure is invalid, Griffin said. And he reminded the court of an earlier decision in which justices declared that procedures for referenda and initiatives must be followed strictly with little leeway for mistakes.

But Mueller replied that the actual statute had not been entered into the state’s books when his clients first started circulating their petition. Not only that, but Griffin’s argument was too fine a distinction to make, Mueller said. “The issue here is direct democracy,” Mueller said. “The Legislature has passed a tax and the people want their say on it.” And he added that Griffin’s arguments could end up robbing the people of their referendum powers entirely.

“The grand theme of their arguments is to make the referendum a dead letter,” he said, using a legal term that refers to a law or legal practice that is not longer used or enforced. “If this referendum can’t get on, then none can.”

But Griffin replied that actually complying with the rules wasn’t that difficult, and could have been accomplished in the time allotted.

Notably, one of Mueller’s arguments was that the petition should be allowed to go to voters because the Legislative Counsel Bureau wrote the portion of the measure designed to explain the intent of the petition to voters. Assemblyman Jim Wheeler, R-Minden, requested help in drafting that part of the document. That put legislative lawyers in an extremely rare and uncomfortable position, providing critical help to an effort to undo a law that their fellow lawyers wrote and helped pass in the first place. Not only that, but the entire repeal effort is led by one Republican constitutional officer — Knecht — who is fighting a measure that was sought by fellow Republican Gov. Brian Sandoval.

At one point in the proceedings, Justice Michael Douglas had to prod Mueller to get back to arguments over the referendum when Mueller digressed into a short political diatribe about the nature of government. “The two things I’ve noticed about government: It never gets any smaller and taxes never go down,” Mueller opined.

Mueller also said it was rare to see a referendum proposed by voters, instead of the more common initiative. (Referendums ask voters if particular laws should be kept or repealed; initiatives propose new laws or constitutional amendments.) One reason for that might be the fact that by the time a law makes it through the Legislature, it’s been through hearings, subjected to amendments, and been the subject of lobbying by opponents and proponents. In the case of the bill that created the commerce tax, 50 of the 63 lawmakers voted yes, easily surpassing the two-thirds constitutional requirement to raise or create a new tax. That consensus is often hard to forge, and the only measures that survive the process are those that achieve broad consensus.

Thus far, the would-be tax repealers have enjoyed all the success; a Carson City District Court judge refused to stop the petition in a ruling late last year. Supreme Court Chief Justice Ron Parraguirre said he and his colleagues would provide a timely ruling on the appeal.

If it’s granted, the petition would effectively be dead, since there’s no time to re-write the measure and start collecting signatures all over again before the June 21 deadline. If the appeal is denied, then it’s up to organizers to collect the required 55,233 valid signatures by the deadline. If they fail, the referendum dies.

But if they succeed, and the measure goes on the ballot, things really get interesting: If voters approve repealing the commerce tax, it’s erased from the law. But if voters decide to keep the tax, it’s frozen in statute, and cannot be changed in the future without another statewide vote of the people. (That even applies to small changes, such as the rate of taxation, a business category, etc.)

That’s why opponents are fighting the referendum so hard. For them, the only success is keeping the measure off the ballot in the first place.


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