Attorneys for the Legislature and Democratic Gov. Steve Sisolak are asking a court to dismiss a lawsuit filed by legislative Republicans that challenges the constitutionality of a bill cancelling a scheduled decrease in the state payroll tax.
In motions filed this week, Deputy Solicitor General Craig Newby and Legislative Counsel Bureau attorney Kevin Powers asked the Carson City District Court to dismiss a complaint that the bill passed in the waning moments of the 2019 Legislature needed a two-thirds majority vote, as required of legislation that increases taxes. The lawsuit also challenges a bill, SB542, which extends a $1 DMV technology fee into 2021.
Newby, who is representing the executive branch officers named in the lawsuit, wrote in the motion that Democratic leaders’ interpretation — that it needed only the simple majority vote it received — was “consistent with the history, public policy, and reason for the supermajority provision.”
“To the extent there is any ambiguity requiring interpretation, this Court should interpret the supermajority provision narrowly in conjunction with the intent that it apply only to new or increased taxes relative to the prior fiscal year,” Newby wrote. “This is consistent with how other states, including Oklahoma and Oregon, interpret their equivalent supermajority provisions.”
The lawsuit was filed in July by all eight Republican senators, as well as three companies that pay the payroll tax. Defendants include Sisolak and Democratic Senate Majority Leader Nicole Cannizzaro.
Several business groups later filed motions to join onto the lawsuit, including the Retail Association of Nevada, Nevada Trucking Association, National Federation of Independent Business and Nevada Franchised Auto Dealers Association.
Republicans say that passing the tax extension on a simple majority vote “creates a dangerous precedent,” and they argue in the lawsuit that the decision hurts Republicans because it nullifies plaintiff senators’ votes against the tax. Democrats were one vote shy of having a supermajority in the Senate this spring.
“We have checks and balances for a reason and eroding the two-thirds requirement is an unprecedented disregard for the constitution and creates a dangerous precedent,” Senate Republican Leader James Settelmeyer said in a statement when the lawsuit was filed.
But Newby, arguing on behalf of the Legislature, wrote in the motion that because the bill does not effectively change business tax rates at any time — keeping rates constant in the face of a scheduled decrease or “sunset” — the move by lawmakers to pass both bills without a two-thirds supermajority is allowed under the Constitution.
In 1996, voters overwhelmingly adopted a constitutional amendment championed by former Gov. Jim Gibbons that requires a legislative supermajority to raise or extend any new taxes. Nevada is one of 16 states that require a supermajority vote for any tax increase.
Newby also cited cases in Oregon, Oklahoma and South Dakota where high courts in those states ruled that similar supermajority requirements for tax bills in those states didn’t necessarily apply to extensions of a tax that would otherwise expire or lower in its rate.
“None of these other states would apply supermajority provision onto the continuation of existing taxes and fees through the elimination of a potential future recalculation clause or the elimination of a not-yet applicable sunset provision,” he wrote.
Republicans had sought a decision by Oct. 1, when businesses begin paying the first round of taxes at rates specified by the bill, in an effort to avoid the need for tax refunds.
Senate Democrats sought but failed to win over at least one Republican to SB551, the tax extension bill, so they proceeded with passing the measure on a simple majority. They also added language that injected almost $10 million into the Opportunity Scholarship private school funding program, and that killed the Education Savings Account program.
Both programs were favored by Republicans who voted against the bill.
Updated at 10:45 to reflect that the Legislative Counsel Bureau also filed a motion in the lawsuit.