Legislative Democrats moved closer last week to a budget debacle involving the state constitution and tax increases.
On Thursday, the Assembly Taxation Committee, on a party line vote with all Republicans opposed, forwarded Assembly Bill 538 to the full chamber. The proposal scuttles a scheduled reduction in the payroll tax paid by Nevada businesses. That would raise about $100 million over the next two years, money integral to funding Gov. Steve Sisolak’s budget.
Under Nevada law — imposed in 1996 by state voters through the Gibbons Tax Restraint Initiative — any bill in Carson City that “creates, generates or increases any public revenue in any form” must pass with a two-thirds majority in both houses of the Legislature. Democrats enjoy such dominance in the Assembly, but they are one vote shy of a supermajority in the state Senate, and legislative Republicans are in no hurry to sanction a tax hike.
Recognizing the conundrum, the governor and his Democratic allies in the Legislature argue disingenuously that AB538 does not raise taxes, it simply extends current rates. This is a position of pure political convenience. In previous sessions, Democrats have recognized that bills abolishing tax sunsets do indeed require two-thirds support if they are to pass constitutional muster. It’s basic logic that even most attorneys can grasp. If AB538 fails, the state will have $100 million less to spend over the next biennium. Ergo, AB538 “generates or increases … public revenue” and is subject to the two-thirds requirement.
Nevertheless, majority leaders sought a nonbinding opinion from the Legislative Counsel Bureau — which provides legal advice to lawmakers — on the matter. To nobody’s surprise, the LCB this month provided Democrats the cover they craved, a long-winded and tortured 24-page exercise in evasion that would have made Humpty Dumpty proud, purporting to show the plain language of the Nevada Constitution on tax hikes doesn’t mean what it clearly says.
Democrats are now threatening to push the tax hike through the Senate even if they’re unsuccessful at ipping a Republican or two to meet the constitutional mandate. That approach will prompt a court challenge and is not without risk, potentially leaving the budget with a gaping hole.