Fallacious Supreme Court ruling probably dooms commerce tax referendum

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Though anyone capable of signing a petition with anything other than an “X” understands that a vote to repeal a tax would require lawmakers to either cut spending or find revenue elsewhere, the Nevada Supreme Court in its infinite pettifogging wisdom ruled this past week that Nevada voters are just too darned dimwitted to understand this and must be lead by the nose.

The unanimous opinion found the description on the petition seeking to repeal the commerce tax passed by the 2015 Legislature failed to tell signers of this fact and therefore was misleading and deceptive.

The group RIP Commerce Tax, headed by state Controller Ron Knecht, had already gathered 20,000 signatures of the 55,000 needed by a June 21 deadline before it suspended circulation of the petition pending the court’s decision. Now those 20,000 signatures are invalid and the process must start over with only a month to go.

Knecht vows to try to qualify the referendum for the November ballot, though he concedes the chance of getting enough signatures is uncertain.

He plans to quickly submit new wording for the 200-word petition description to the district court judge who had approved the previous description. The new description lifts language and figures from the Supreme Court opinion and adds a sentence saying: “So, there would be a net $74.9 million reduction in state fiscal year 2016/17 revenues, technically unbalancing the budget, and $59.9 million in succeeding years.”

The commerce tax would impose a gross receipts tax on all businesses grossing more than $4 million a year. It has different tax tables for 27 different industries — ranging from a low of 0.056 percent for mining to a high of 0.362 percent for rail transportation in 67 different levels of revenue. Future legislatures could increase rates or lower the threshold.

Lawmakers passed the commerce tax with a two-thirds majority in a Republican-controlled Assembly and Senate for signature by a Republican governor, even though voters turned down at the ballot box the previous November a nearly identical, though considerably larger, version of the commerce tax by a margin of 4-to-1.

The Supreme Court ruling said repeal of the tax would lead to an unbalanced budget, which the state Constitution prohibits, and “the description of effect makes no mention whatsoever of this critical consequence. Accordingly, we conclude that the referendum’s description is deceptive for failing to accurately identify the practical ramification of the commerce tax’s disapproval, and any signatures obtained on petitions with this misleading description are invalid.”

Apparently, snipping $60 million a year from a multi-billion-dollar state budget creates a crisis, even though in the real world the state managed to survive when the recession axed the state revenues by $536 million from 2008 to 2009.

Also, Michael Schaus, communications director at the Nevada Policy Research Institute, points out just how phony that balanced budget argument is.

The revenue from the current commerce tax will be deposited in the state treasury by Aug. 15 — before the November elections — meaning no revenue loss this fiscal year. The Legislature meets in February 2017, giving it ample time to deal with a potential dearth of commerce tax revenue by next August.

“There would be no crisis, no devastation of government agencies and no budgetary hole,” Schaus writes. “The court’s ruling says the petition must now include language warning against a hole in the state budget — a hole that, in truth, is imaginary.”

Though odds of the tax repeal being on the November ballot are rather long, having it on the ballot might create a quandary for astute voters.

Knecht’s petition description — old and new — notes that disapproval of the commerce tax “does not prohibit the Legislature from enacting future legislation that imposes a commerce tax,” conceivably an even more onerous one.

But the Supreme Court ruling notes that if voters let the commerce tax stand, it “shall not be amended, annulled, repealed, set aside, suspended or in

any way made inoperative except by the direct vote of the people.” Doesn’t not amended mean not increased?

It would be tempting to freeze it from legislative meddling, because, as the lawyer for RIP Commerce Tax pointed out in oral arguments before the court, when the income tax was created in 1913 it was supposed to be only on millionaires, but today everyone pays. “Now, the two things I’ve noticed about government, it never gets any smaller, taxes never go down,” the lawyer said.

If given the opportunity, we encourage voters to sign the petition so we might face just such a quandary. —TM

 

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