CARSON CITY – A Carson City District Judge today ruled an initiative petition being circulated by teachers to levy a 2 percent tax on companies making gross revenues in excess of $1 million a year to raise money to support public education is invalid.
The Nevada State Education Association said it will appeal the decision to the Nevada Supreme Court and will continue to collect signatures to qualify the measure.
In his ruling, Judge James Wilson found that the description of effect used to explain to voters the intent of the petition is incomplete.
The validity of the petition was challenged by a group of Nevada business groups called the Committee to Protect Nevada Jobs.
“The Committee (to Protect Nevada Jobs) argues the description needs to tell those being asked to sign the petition how much revenue the tax will generate,” Wilson said. “The court agrees the amount of revenue is an effect that those being asked to sign the petition should know.
“Failure to inform those being asked to sign the petition is a failure to explain a material ramification of the initiative,” he said. “The amount of revenue the tax will probably generate must be included in the description. Failure to include the probable amount invalidates the petition.”
The judge also cited several other aspects of the description of effect as misleading, including the fact that millions of dollars of the tax would be directly sent to the Department of Taxation to cover the costs of administering the tax. Additionally, the description of effect does not specify that the tax would also be levied against businesses that are operating at a loss. The judge noted that such an effect would be a major impact of the petition and should have been specified in the description.
John La Gatta, chairman of the Committee to Protect Nevada Jobs, said in response to the ruling: “This petition, which should have been called the Margin Tax Petition, would have greatly harmed business and jobs in our state and not helped our education system at all. Imposition of this tax would greatly harm economic development. We are delighted with this ruling.”
Josh Hicks, attorney for the Committee to Protect Nevada Jobs, said he was not surprised by the ruling.
“We knew that the description of effect was deeply flawed and misleading,” he said. “This is a victory for all Nevadans and should send a strong message that the courts will not allow such deceptions against the public.”
In a statement, the teachers association questioned how Wilson could find the description proper in an earlier ruling in August, but find the same wording flawed in today’s ruling.
“While NSEA anticipated and planned for legal challenges, we also expected consistency in the court’s rulings,” the statement said. “The description of effect, the 200-word summary of the petition, was declared as succinct, straightforward, and not misleading in August and has only been changed in non-substantive aspects and in aspects not relevant to today’s ruling. We do not agree with today’s ruling that is at-odds with the court’s prior decision.
“Through all of the recent economic travails, Nevada voters have understood that our path to prosperity needs to include a renewed commitment to education funding and they are demonstrating that understanding by supporting our referendum,” the statement said. “NSEA’s recently finalized report, By the Numbers, shows that an investment in education is an investment in our state’s economic prosperity.”
The association, which has already collected between 55,000 and 60,000 signatures to take the margins tax proposal to the Legislature next year.
The group has until Nov. 13 to collect a minimum of 72,352 signatures to take the measure to lawmakers. The Legislature would then have 40 days to approve the proposal or it would go to the voters in 2014.
The proposed Texas-style margins tax would raise an estimated $800 million a year for public education.
Wilson’s ruling prohibits the petition from being submitted to the Legislature next year or to voters in 2014.