Judge strikes down business tax petition, union leaders vow to refile

Gary Peck, executive director of the Nevada State Education Association, said a new petition will be filed with the secretary of state before the end of the week.

"We are very confident that the new petition will withstand any further legal challenges and we will gather more than enough signatures to qualify it," Peck said. "The people of Nevada will enact the margins tax because they understand the system is broken and we need to create a dedicated stable source of funding for K-12 schools."

Earlier Monday, Carson City District Judge James Wilson ruled the Education Initiative violated a state law that requires petitions to be limited to one subject. The judge sided with business groups, noting that the tax proposal called for the higher tax and required that the public disclosure of what companies pay in business taxes.

The measure backed by the Nevada State Education Association and Nevada AFL-CIO seeks to impose a 2 percent margins tax on businesses that gross more than $1 million annually. Supporters say it would generate about $800 million annually and increase funding for K-12 education.

If the new petition clears judicial review, the unions would have until Nov. 13 to collect 72,324 valid signatures to force the Legislature next February to consider adopting the tax. If legislators, as expected, reject the tax proposal, then the matter would be placed before voters in the November 2014 election. A similar tax plan received scant consideration in the Legislature last year.

The judge ruled the unions did not clearly state in the petition’s 200-word description that its primary purpose would be raising money for public education.

The short description of effect is what voters usually look at before deciding whether to sign a petition. The Education Initiative petition itself was more than 20,000 words long.

Wilson also found that the petition does not give enough money to the Department of Taxation to administer the new tax or disclose that even losing businesses would be taxed.

Wilson upheld the arguments raised last week by Josh Hicks, the lawyer for the Committee to Protect Nevada Jobs. That committee includes the Las Vegas Chamber of Commerce, the Retail Association of Nevada, Nevada Taxpayers Association and other business groups.

Hicks said his organization will look closely at whatever new petition is filed by the unions.

"If it has the same problems, we will be back in court litigating the issues again," Hicks said.

He had noted in the hearing that there was no guarantee if the tax were approved, the money would have gone to education.

After that hearing, Lynn Warne, the president of the Nevada State Education Association, acknowledged that Legislature could back out current funds spent on education and use them for other purposes. But she said she hoped the Legislature would do the right thing.

The unions had held off circulating the petitions in case Wilson found its language was defective. If a judge changes even one word in a petition, then all signatures that circulators already gathered would be invalid.

Because successful challenges have been filed against every petition proposed since 2006, none has appeared on the election ballot. Last week, the state Supreme Court threw out a petition to raise sales taxes in part of Clark County to construct a sports arena.

The Associated Press contributed to this report. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3900.