Appeals Court Rejects Two-Thirds Majority Tax Case

By: Associated Press
By: Associated Press

A federal appeals court on Wednesday dismissed a challenge to a Nevada Supreme Court decision that could have enabled the state's lawmakers to increase taxes last year without a voter-required two-thirds majority.

The 9th U.S. Circuit Court of Appeals disposed of the case in a 7-page memo that said the Legislature finally passed an $833 million tax plan with a two-thirds' vote and as a result the challenge was moot - lacking any legal significance.

There's no possibility of the decision being used to resolve some future legislative impasse over taxes because it was "directed to specific periods of time that have already passed," the San Francisco-based appeals court added.

The court also rejected a claim for damages, saying the 24 Republican legislators who sued following the Supreme Court ruling could allege only "an abstract injury" that might have resulted had an earlier tax plan won final approval on a simple majority vote.

That earlier plan wasn't approved and "no taxpayer paid a nickel into the coffers of Nevada under its rule," the circuit court memo said.

The decision had been expected. During arguments last month, all the judges on a three-member panel of the circuit court suggested they wouldn't tinker with state law as interpreted by Nevada's top court.

Following the Nevada Supreme Court decision, exactly two-thirds of lawmakers passed last year's budget and tax plan, which included new or increased taxes on business receipts, payrolls, cigarettes, live entertainment, casinos, liquor and more.

Nevada's justices ruled 6-1 that an "irreconcilable conflict" existed between requirements in the Nevada Constitution to fund education adequately and to abide by the two-thirds requirement. The high court ruled that schools took priority over the number of votes lawmakers needed to increase taxes.

The attorney representing the Republican lawmakers had urged the circuit court to reinstate a case that a lower federal court and the U.S. Supreme Court have turned away.

John Eastman, a Chapman University law professor, referred to a voter mandate for a two-thirds majority of Nevada legislators on tax increases in calling the Nevada high court's decision an "end run around the people."

Arguing for Gov. Kenny Guinn, who supported higher taxes, Nevada Solicitor General Jeff Parker urged the judges not to intervene, saying the case was moot because lawmakers eventually met the two-thirds threshold.

Eastman said he was "a little disappointed but not surprised" by Wednesday's court memo given the way the oral arguments went. He said he'll consult with his clients to see if further litigation is warranted.

"We could petition for a rehearing or file a motion to publish it," Eastman said of the memo. As an unpublished court document, he added it lacks the status of a published order that could be cited if a similar dispute developed at a future legislative session.

While the court didn't rule the way Eastman had hoped, he noted the decision does say that the state Supreme Court's decision applied only to the 2003 tax impasse, and that element is important "if we have this fight again in 2005."

Gov. Guinn and Attorney General Brian Sandoval issued brief statements saying they respected the circuit court's action.


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