The Nevada Supreme Court ruled tax increases unconstitutional



CARSON CITY – Two critical revenue laws that were passed through the legislature by the democratic majority in 2019 could not be passed with the required two-thirds majority and are unconstitutional, ruled a unanimous supreme court of the state.

The court’s ruling, published Thursday, upholds a lower district court ruling and is an unqualified victory for Republicans who were sued by one less than a two-thirds majority for passing two Senate bills after the 2019 session. The decision will have an immediate impact on the revenue from the two-year-old legislation and tax negotiations in the current session.

“Today’s unanimous ruling by the Nevada Supreme Court made one thing clear: the leaders of the Nevada Democrats have knowingly violated the Nevada Constitution,” Senate minority leader James Settelmeyer, R-Gardnerville, said in a statement. “This is a victory for all Nevadans. We should remember that it was the voters who put the two-thirds requirement in the state constitution, and that provision is now guaranteed. “

At the end of the 2019 meeting, the Democrats pushed through the extension of an existing business tax and DMV license surcharge and achieved expected sales of $ 105 million. The Democrats had sought revenue measures to increase funding for education, a legislative priority.

As part of a 1994 voter-backed amendment to the state constitution, bills increasing taxes required a majority in both houses, but Democrats argued that the tax laws merely extended existing taxes and were therefore exempt from the requirement.

The court disagreed and upheld a district court ruling in September.

“Since both bills create, generate or increase public revenue so that the plaintexts of the super-majority rule apply, the district court rightly found that they were passed unconstitutionally in the Senate with less than a super-majority vote,” wrote Chief Justice James Hardesty for the courts. “The arguments of the state for the interpretation of the super-majority rule are not convincing.”

In a statement accompanying the ruling, Legislative Democrats diverted attention from constitutional issues and instead focused on the financial impact of lost revenue on educators and critical school security infrastructure. “

In defying the law, Republicans tried to “protect the bottom line of some of the largest corporations in the state at the expense of schools in Nevada,” Congregation spokesman Jason Frierson and Senate Majority Leader Nicole Cannizzaro said in one joint statement accusing Republicans of “partisan” politics. “

Rep. Robin Titus, R-Wellington, the Republican minority leader, said the decision was “in line with the intent of the law – to protect citizens from unfair taxation.”

The Clark County Education Association, the negotiating partner for around 18,000 teachers in the Clark County School District, called for a bipartisan solution to possible funding shortages in the education sector as a result of the decision.

“CCEA believes that given the Supreme Court’s ruling on the revised business tax, it is the duty of Republican and Democratic lawmakers to work across party boundaries to secure additional funding for our K-12 education system,” a statement said Labor union.

Effects of the decision

The challenge includes Senate Draft 551 and Senate Draft 542 from the 2019 session. SB 551 extended the existing rates under the modified business tax beyond a planned expiration date in July 2019 and generated around 98 million US dollars. SB 542 extended for two years a $ 1 technology fee that motorists had to pay to the DMV, which was due to expire last July. This fee generates approximately $ 7 million.

The Senate approved the bills in question with 13 votes to 8. They first came to a vote with the usual tax waivers that suggested they needed a two-thirds majority. After being rejected in this form, the bills came back to the Senate 15 minutes later without these disclaimers.

The eight Republican senators filed a lawsuit after the session. Republicans won a Senate seat in the 2020 election; the partisan split is now 12: 9 in favor of the Democrats.

Taxes to be refunded

The Supreme Court upheld a ruling by Carson City District Judge James Todd Russell, whose ruling, after a 90-minute hearing in September, also required the state to repay improperly earned income to taxpayers with interest. This is probably about double-digit million amounts.

The decision will not only force the state to repay taxes that have already been collected with interest, but will also have an impact on the pending state budget, which is now before the legislature for the two-year cycle beginning in July. The budget proposed to the legislature by Governor Steve Sisolak included the revenue from the two taxes.

“Following today’s ruling by the Nevada Supreme Court, we will continue to work with lawmakers on the budgetary impact and state officials will analyze the decision to determine next steps,” the governor said in a statement responding to the decision .

Business groups that were added to the case that paid more than plaintiffs due to the 2019 tax extension praised and cited the ruling for “upholding the will and intent of the people of Nevada regarding the increase in taxation.”

“Our organizations speak for hundreds of thousands of Nevada employees and their employers, and we will continue to advocate and remain vigilant for their rights and interests in our government,” said the Retail Association of Nevada, Nevada Trucking Association, Nevada Franchised Auto Dealers Association and the National Federation of Independent Businesses said in a statement.

Another plaintiff, Joe Dutra, owner of Kimmie Candy in Reno, called the court’s decision “a great success”.

“When a small business gets involved in a lawsuit like this, there is concern about the implications of the legislature or the governor,” Dutra said. “I am not politically connected – I just believed in the matter.”

Dutra said his company, which has around 40 employees, has paid about $ 30,000 in “unfair taxes” over the past two years.

“I could understand if it were passed by a bipartisan majority, but the legislature did not abide by the constitution,” he said. “You can’t let the government control your life like that.”

Any tax revenue that goes back to Kimmie Candy will be invested in the business, Dutra said.

“It’s not like going out and buying a new car or anything,” he said. “Everything we get will be used to create more jobs in Nevada.”

Change history

The two-thirds provision was conceived in 1994 when then MP Jim Gibbons circulated the measure while running for governor against Democrat Bob Miller. Miller won the election, but the two-thirds measure was passed overwhelmingly that year and again in 1996 when it became part of the state constitution. (Gibbons was later elected governor in 2006 and served a single term.)

The two-thirds measure was the subject of controversy in 2003 when the legislature, paralyzed by taxes to finance schools, was unable to close its dealings on time and was sued by the government at the time. Kenny Guinn. Another Supreme Court analyzed the Constitution and concluded that lawmakers could simply ignore the measure and pass taxes by simple majority.

This controversial ruling was later overturned after it was widely criticized. In 2003, despite the court ruling, the legislature finally found enough votes to pass the tax package with two-thirds.

Other tax plans – including the trade tax passed in 2015 when Republicans controlled both houses of the legislature and the governor’s mansion – have always raised two-thirds.

Jeff Stempel, a law professor at the William S. Boyd School of Law at UNLV, said he was against the super-majority legal requirements to promote “minority tyranny.” The ruling focused too narrowly on the wording of the constitutional amendment and not on its likely intent.

“When people voted for it in 1994 and 1996, did they really think it would take a super majority to change a license fee?” Said Stempel. The law was more aimed at major tax changes, he said.

“I think there is some ambiguity, but I think you can certainly read the background so that the two-thirds requirement was for big, meaningful things,” he said. “It shouldn’t apply to things like fee increases. According to this view, does that mean that the legislature cannot close a loophole without a two-thirds majority? “

Contact the Capital Bureau reporter Bill Dentzer at [email protected] consequences @DenzerNews on twitter. The review journal’s author, Rory Appleton, contributed to this story.

Legislature v. Settelmeyer-OPINION by SteveSebelius on Scribd



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