Nevada Supreme Court Hears Margins Tax Case

Attorneys for the teachers association and state business interests faced off before the Nevada Supreme Court today over whether a proposed margins tax initiative petition has met legal requirements and so should be submitted to the 2013 Legislature.

A Carson City district court judge earlier this year said the petition filed by the Nevada State Education Association to establish a 2 percent tax on companies making gross revenues in excess of $1 million a year was invalid because the 200 word “description of effect” was incomplete. It did not specify how much revenue the tax would generate, said Judge James Wilson in a ruling in October.

A group called The Committee to Protect Nevada Jobs challenged the petition. The teachers association appealed to the Nevada Supreme Court, which heard oral arguments in the dispute today. The court, which met in Las Vegas, will rule later on the matter.

Nevada Supreme Court.

Despite the lower court ruling, the association last month turned in 152,000 signatures, more than double the required number to qualify the petition for consideration by the Legislature.

If the petition is found by the court to have satisfied state legal requirements, the Nevada Legislature will be required to take up the proposal when it convenes in February. 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.

Justice Ron Parraguirre asked whether it is a material effect that a business could face a loss and still be required to pay the tax.

“Isn’t that a material effect that ought to be disclosed?” he said.

Francis Flaherty, attorney for the teachers, told the court the backers of the measure should not be subjected to a “judicial slot machine” where decisions on what to include in the description are subjected to second guessing by the judiciary.

“You’ve only got 200 words,” he said.

Flaherty called the petition “core political speech” that the Supreme Court has said in previous rulings it must do “everything in its power to uphold.”

Justice Michael Douglas asked attorney Josh Hicks, representing The Committee to Protect Nevada Jobs, how the court is expected to pick and chose what to include in the description given the complexity of the proposal, which totals 22,000 words.

Hicks said the 200-word description could very easily be written to be accurate for those asked to sign the petition. He said an accurate description is a fundamental protection to ensure potential signers of the petition know what the measure would do. There is no guarantee that the tax proposal will generate any additional money for public education, which is a material fact that should have been disclosed, he told the court.

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Audio clips:

Attorney Francis Flaherty says the description of effect satisfies state law:

120512Flaherty :14 got 200 words.”

Attorney Josh Hicks says there are no guarantees the proposal will increase education funding:

120512Hicks :23 change in it.”