Petition to repeal commerce tax wins first battle

Unlike Chuck Muth’s petition to repeal the entire 2015 tax package which was tossed out by Judge Todd Russell, the more focused petition spearheaded by Controller Ron Knecht to repeal just the commerce tax part of the package survived its first test on Wednesday.

Carson City District Judge James Wilson rejected nearly all the arguments that would keep the so-called RIP petition off the ballot, withholding judgment on just one issue: whether the ballot question would unconstitutionally create an unbalanced budget.

That issue, he ruled, was not yet “ripe” for judicial consideration and wouldn’t be until and unless voters approve the repeal.

Petition opponents, the Coalition for Nevada’s Future, are expected to appeal the ruling to the Nevada Supreme Court.

Wilson agreed with RIP lawyer Craig Mueller the referendum proponents shouldn’t have to balance their repeal of the tax on business gross with measures that would either increase spending to cover the loss or cuts to balance the overall budget. He said that would place a huge burden on any individuals or groups seeking to repeal a tax provision.

The tax was projected to raise about $121 million over the two-year budget cycle.

“If the people vote to repeal the tax, the legislature will have the task of balancing the budget,” Wilson said.

He also rejected the argument by Coalition for Nevada’s Future counsel Matt Griffin the petition is void because it’s Description of Effect doesn’t explain to voters a vote for the ballot question would repeal the tax but a vote to retain the tax would essentially etch the commerce tax provisions in stone.

“If the statute is affirmed by voters, it can never be touched by the Legislature. There would be no ability to amend, repeal or set it aside,” Griffin told the court.

He and co-counsel Kevin Benson argued for that and other reasons, the Description of Effect is completely inadequate and doesn’t tell voters clearly what their vote would do.

But Wilson pointed out if the petition would get on the November 2016 ballot, it will have a statement of what it does written by the Secretary of State’s office as well as arguments both for and against the question that would adequately inform voters.

Whether or not that creates a constitutional violation by unbalancing the budget, he said, can be decided after the vote of the people and, therefore, isn’t legally “ripe” to decide this early in the game. But Wilson appeared to contradict his own judgment in that decision by then ruling the constitutional issue “substantive,” raising the question whether he has jurisdiction to make that judgment if the issue isn’t legally ripe.

Wilson rejected the argument the petition as written contains “administrative details” the Nevada Supreme Court has ruled are the province of the executive branch, not subject to a ballot question saying those administrative details are in the tax legislation SB483, not inserted by the petition authors.

Mueller argued the commerce tax — a levy based on gross receipts of a business — is similar to the “margins tax” proposed by the state teacher’s union and defeated by a nearly 4:1 margin by voters in the 2014 elections. He said its passage by the 2015 Legislature amounts to “arrogance of the voters’ will.”

He said referendums are designed to allow voters to repeal laws they don’t approve of.

“In this state, people have a right to repeal legislation,” he said.

But Benson argued the people’s petition rights don’t supersede the Legislature’s power in Nevada. He said they are co-equal and, if the Legislature can’t do something, then a referendum petition can’t either. He said that means since lawmakers can’t unbalance the state budget, the voters can’t either.

He and Benson argued if anything, the petition should be rewritten as an initiative petition that could repeal the commerce tax without prohibiting the Legislature’s ability to make further modifications later. In that case, Griffin said, “it’s not initiative season yet.” Initiatives must wait until January by statute.

Mueller concluded his argument by telling Wilson, “there is absolutely no need for judicial interference in the political process at this point.”

He was ordered to prepare an order detailing Wilson’s rulings on all the arguments in the case by December 9.

The earlier petition to repeal the entire tax package in SB483 was rejected because it contained more than a dozen different subjects and issues — violating the rule a ballot question focus on just one subject. Even opposition lawyers concede the RIP petition doesn’t violate that provision.

To put the issue on the November 2016 ballot, Knecht and his backers will have to collect at least 55,234 valid signatures including at least 13,809 in each of Nevada’s four petition districts — the state’s congressional districts.