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September 30, 2014

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Nevada Supreme Court hears arguments on margins tax petition

A lawyer for a coalition opposing an initiative petition to create a new business tax argued before the Nevada Supreme Court today that the labor and teachers unions supporting the initiative deceived voters into believing the tax would help fund education.

It’s an argument a District Court judge in Carson City agreed with when he declared the petition invalid because its “description of effect” was misleading.

But in appealing that decision, the lawyer for the political action committee backing the petition said the lower court’s decision inhibits political speech and imposes an impossible-to-live-up-to set of requirements on what the 200-word description must do.

At issue is the Education Initiative — circulated by the Nevada State Education Association and partner labor unions — which would impose a margins tax on business revenue. The money generated from the tax — perhaps as much as $1 billion — would be deposited into the state account that funds public schools.

But lawyer Josh Hicks, representing the Committee to Protect Nevada Jobs, argued the revenue from the tax would simply relieve the obligation on the state’s general fund to pay for education. Free of the $1 billion obligation, Hicks said, the Legislature could decide to fund anything else in state government with the freed-up dollars.

“This question right here undeniably puts more money in general fund state coffers,” Hicks said. “Our argument is that should be disclosed to the people.”

In his decision declaring the petition invalid, Judge James Wilson agreed with that argument and also declared the description of effect should have told voters how much revenue the petition would generate and that businesses operating at a loss would have to pay it.

Justice James Hardesty, however, showed little patience for the game of hypotheticals, questioning how many possible scenarios need to be included in the 200-word description of what the initiative petition would do if enacted.

He questioned whether Hicks’ argument relied on “a hypothetical that the Legislature will or won’t do something with that extra billion bucks.”

“Where does this end,” Hardesty said. “I think these hypotheticals just go on forever.”

The lawyer for the education initiative, Frank Flaherty, also argued Hicks was relying on simple “speculation.”

“The Legislature determines the per-pupil support,” Flaherty said. “This does not in any way obligate the Legislature to take any money the committee thinks is surplus and send it somewhere else.”

Justice Michael Douglas questioned whether the 200-word limit on the description of effect should be declared unconstitutional.

"How do we pick and choose what should be told to the public to prevent their confusion and promote an informed decision," Douglas asked. "How do we do that in 200 words?"

Under state law, a judge can throw out an initiative petition during the signature-gathering stage if it is found to violate the single-subject rule, or if its description of effect is misleading. In this case, Wilson found the Education Initiative did not violate the single-subject rule.

But some of the justices seemed willing to revisit that question.

"Why do you think this does not violate the single-subject rule?" Justice Mark Gibbons asked.

If the Nevada Education Association, which collected enough signatures to move the petition forward, wins the appeal, the petition will be sent to the Legislature. If the Legislature decides not to enact the tax, the question would be placed on the 2014 ballot.

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