Nevada judge invalidates business tax initiative

CARSON CITY, Nev. -- A state judge Tuesday invalidated a Nevada tax initiative pushed by the state teachers union and other labor groups to raise money for education, saying the description of what it would do was deceptive and misleading.

The ruling by District Judge James Wilson blocks organizers from submitting the measure to the 2013 Legislature for consideration or to voters in 2014. Organizers faced a Nov. 13 deadline to collect 72,352 signatures to keep the effort alive.

Called the Education Initiative, the petition sought to impose a 2 percent margin tax on businesses with annual revenues of $1 million or more. The Nevada State Education Association, which has already collected around 60,000 signatures to qualify the initiative, has said it would raise $800 million a year for K-12 education.

Committee to Protect Nevada Jobs, a pro-business group, challenged the 22,000-word petition on several grounds.

One main argument committee lawyer Josh Hicks raised during an earlier hearing was that the petition doesn't guarantee more money for education. While the measure says the money raised would be placed into an account dedicated for schools, he argued state lawmakers could reduce other general fund money that now goes to education.

Wilson agreed.

"The initiative does not prevent the Legislature from supplanting existing education funds with the margin tax," the judge wrote. "Thus, the effect is to free up funds for the Legislature to use as it wishes, for education or non-education purposes. This effect is something those being asked to sign the petition should know."

During a hearing earlier this month, NSEA attorney Francis Flaherty said trying to predict what the Legislature might do in the future was speculative and not a legal basis on which to determine whether the measure itself passed judicial muster.

The teachers union did not have an immediate comment on the ruling, though an appeal to the Nevada Supreme Court is likely.

Wilson also said the measure's description should have informed voters how much the tax would generate and that even businesses operating at a loss would be subject to its provisions.

It was also deceptive because it didn't stipulate that some money would go to the Department of Taxation for costs to implement and administer the tax, Wilson said.

The same judge in August determined the initial language of the petition was invalid because it dealt with more than one subject. Backers rewrote it and refiled it the next day.