Tax hike suit hits a dead end in court

Thursday, May 13, 2004 | 10:53 a.m.

CARSON CITY -- A legal defeat in federal court has apparently ended Republican state legislators' efforts to erase last year's Nevada Supreme Court ruling that permitted taxes to be raised without a constitutionally mandated two-thirds vote by the Legislature.

"I think this is the end," Assembly Minority Leader Lynn Hettrick, R-Minden, said Wednesday after the 9th U.S. Circuit Court of Appeals rejected the legislators' appeal.

The court ruled that the Republican-filed lawsuit was moot because state lawmakers eventually passed a tax increase with the required two-thirds vote.

Solicitor General Jeff Parker, who defended the ruling before the circuit court, said the appeals court recognized that any "alleged deficiencies were mooted by the entire two-thirds vote in passage of SB8," the bill that increased taxes and was signed into law by Gov. Kenny Guinn.

John Eastman, attorney for the 24 Republican lawmakers, said he did not know what course he would recommend the lawmakers take. He could ask for the full court to consider the issue rather than a three-judge panel or he could carry an appeal to the U.S. Supreme Court.

"Another option is to ask the 9th Circuit to publish this decision," he said. "I think the claim that this cannot happen again will need to be cited in other court proceedings, perhaps as early as 2005."

The circuit court ruled that the Supreme Court decision was limited to the 2003 dispute and not to future cases.

The issue has already been before the U.S. Supreme Court once and it refused to consider it.

Eastman said, "Even though we lost, we made our point and the politicans will be deathly afraid of doing it again."

He said getting the decision published will mean the case applied only to this single dispute and could not be used as precedent.

Attorney General Brian Sandoval said, "We are respectful of the court's opinion on the matter and its recognition that our Legislature passed the tax bill by the constitutionally required two-thirds majority."

Lorne Malkiewich, director of the Legislative Counsel Bureau, said those who backed the suit probably realized it "was a long shot" to get the federal court to overturn a decision on the Nevada Supreme Court.

"It's nice to have a decision going our way," he said.

When the Legislature reached an impasse last year, Guinn filed suit in the Nevada Supreme Court to force the lawmakers to act. The Supreme Court, in a 6-1 ruling, said that for that case only, the constitutional requirement that tax hikes be passed by a two-thirds majority in each house was superseded by a constitutional demand that lawmakers fund education.

The appeals court, in a 3-0 memorandum decision, said when the Legislature approved the tax plan with a two-thirds vote and passed the appropriation for the public school, the suit by the GOP lawmakers rendered their "claims for declaratory and injunctive relief moot."

The federal court noted no tax bill was passed by the full Legislature and signed by the governor that had less than a two-thirds vote.

"No taxpayer paid a nickel into the coffers of Nevada under its rule," referring to the decision of the Supreme Court that the two-thirds votes were not necessary.

The Republican lawmakers were also concerned that the ruling of the Supreme Court may set a precedent. But the federal appeals court said the Supreme Court's ruling referred specifically to the 20th special session of the Legislature and to passage of Senate Billl 6, another tax bill under consideration.

The Republicans also sought $1 damages, but the federal court said they "failed to allege an injury." It said, "Here, plaintiffs have alleged only an abstract injury" since no tax bill was passed with only a simple majority.

The decision was signed by Judges Thomas Nelson, William Fletcher and Marsha Berzon and upheld the ruling of U.S. District Judge Howard McKibben of Reno.

Hettrick said it was "unfortunate" that the appeals court dismissed the challenge.

He said the decision by the Nevada court told the Legislature to ignore a constitutional requirement. And he said the Nevada Supreme Court got it backward in its ruling. He said the most recent amendment, the two-thirds requirement, takes precedence.

Malkiewich said the decision of the appellate court was not unexpected because of the tone of the comments by the judges at the oral arguments. He said the appeals courts would be "flooded with litigation" if they started overturning the rulings of state supreme courts that interpreted the laws of their own states.

It would "open up a can of worms," he said.