Referendum challenging Nevada commerce tax allowed to proceed

CARSON CITY — A state judge Wednesday ruled that a referendum seeking to put Nevada's new commerce tax to a public vote can proceed.

District Judge James Wilson, ruling from the bench after a 90-minute hearing, rejected arguments by the Coalition for Nevada's Future that the proposed referendum was flawed and didn't meet legal standards.

"The court concludes even if the Legislature enacts a statute, the people do not lose their constitutional right to submit the statute to a vote of the people," Wilson said.

Nevada Controller Ron Knecht, a leader in the repeal movement called RIP Commerce Tax, said afterward that petitions will soon be printed for circulation.

"We will get this on the ballot and we will repeal it," Knecht told supporters.

The proposal is the first referendum in recent memory that would repeal an action passed by the Nevada Legislature. If ultimately approved by voters, the commerce tax would be forbidden territory for state lawmakers. It could only be changed by another public vote.

Matt Griffin and Kevin Benson, representing the coalition of business interests opposed to the repeal effort, argued that the measure as submitted to the secretary of state's office cites only Senate Bill 483 — the bill passed by the 2015 Legislature — instead of statute. The bill contains other taxes and provisions, including administrative procedures for recording keeping.

They also argued that the measure fails to address how the potential $60 million annual budget hole created by repealing the tax would be addressed.

Benson argued that just as the Legislature must adopt a balanced budget, a referendum through petition must meet the same standard and inform voters how the budget void would be met, either by program cuts or other taxes.

"They have to identify how they're going to keep the budget somehow in balance," Benson said.

He also argued the petition's description of effect was misleading because it fails to tell voters the ramifications if the measure is approved.

But Wilson in his questioning was skeptical, saying the state constitution gives voters the right to repeal a law they don't like and that if approved, it would be up to lawmakers to deal with the consequences.

Craig Mueller, attorney for repeal backers, said the referendum "is a valid exercise of Nevada constitutional authority, plain and simple," and denounced the arguments raised by the coalition.

He characterized the issue as a struggle between "those who benefit from government spending and those who pay government taxes," and noted voters in 2014 soundly defeated a different business tax measure backed by the state teachers union.

On the funding issue, Mueller said state budgets approved every two years are merely projections. Sometimes revenue comes in high, other times low. It is then up to lawmakers to fill the gap, he said.

"The idea that we didn't come up with offsetting budget cuts … is fallacious and should be rejected," Mueller told the judge, concluding: "At this point judicial interference is unwarranted."

Wilson agreed, though an appeal of his ruling to the Nevada Supreme Court is anticipated.

Supporters of the commerce tax repeal must gather about 55,000 signatures by June 21 to qualify for the November 2016 ballot.

The commerce tax imposes a levy on businesses with $4 million or more in annual gross revenue. It was part of a $1.4 billion tax package sought by Gov. Brian Sandoval and passed by a two-thirds majority of the 2015 Legislature to fund the current $7.4 billion, two-year budget, including a big increase in public education funding.

Another proposed referendum seeking to repeal the entire tax package was rejected earlier by another judge, though supporters of that effort said they might refile it.

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb