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July 31, 2014

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Ruling invalidates Nevada education tax petition; supporters vow appeal

A District Court judge in Carson City has invalidated a petition pushed by the state teachers union that would place a business tax initiative to fund education on the 2014 ballot.

The Nevada State Education Association and the Nevada State AFL-CIO are in the process of collecting the 72,352 signatures required for their Education Initiative, which proposes to impose a 2 percent margin tax on Nevada businesses with more than $1 million in total revenue.

The tax would raise approximately $800 million annually in new funding for the state's K-12 public schools, the labor unions said.

However, challenging the unions is the Committee to Protect Nevada Jobs, a political action committee that argues the margin tax would hurt businesses. The pro-business PAC filed a complaint seeking injunctive relief and requested that a judge declare the petition invalid on several grounds.

In his ruling Tuesday, Judge James Wilson Jr. agreed with many of the business PAC's arguments, saying the language used to describe the tax's effect to voters was "incomplete, deceptive, misleading, and therefore, invalidates the petition."

Wilson agreed that nothing in the initiative's "description of effect" prevents the Legislature from using the margin tax revenue to replace general fund money that would otherwise go to fund education.

The way the initiative is worded currently, legislators could cut state education funding – supplanting it with the increased business tax revenue – and reallocate those general fund dollars for items other than schools.

"As a result, the effect of the initiative, the Committee (to Protect Nevada Jobs) argues, is the creation of a tax that will allow the Legislature to increase spending for any lawful purpose, including non-education purposes," Wilson said. "This effect is something those being asked to sign the petition should know."

Wilson also agreed the petition failed to explain how much revenue the tax was expected to generate, that the tax applied to businesses operating at a net loss and that millions of dollars would go to the state Department of Taxation to administer the tax.

Those details also should have been disclosed on the petition, Wilson said. The petition initiative has garnered more than 60,000 signatures three weeks before the Nov. 13 deadline.

Wilson's ruling today will be appealed to the Nevada Supreme Court, NSEA spokesman Nick Di Archangel said. There is nothing in today's ruling that disputes the merits of the tax proposal, which seeks to boost state funding for education, nor did the judge grant an injunction to the petition, he added.

"This is part of the process. We expected this to be challenged," he said. "We're confident we will prevail (in the Supreme Court) and the public voices will be heard."

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