Of Note Nevada

Margin Tax Discussion - Nevada Newsmakers

On November 1, I was happy to be Sam Shad's guest on Nevada Newsmakers to discuss the margin tax ballot petition.  We ended up having a lively discussion.  I represented a coalition that is seeking to invalidate the petition and the other guy represented the unions seeking a tax increase.  As an added bonus, you can watch the other guy call me a "fancy talker." 

For context, the margin tax petition has been invalidated by a court twice now this year.   

You can watch it on the newsmakers website here:  www.nevadanewsmakers.com. 

 

 

Margin Tax Petition Invalidated

Today, a District Court Judge invalidated the description of effect in the proposed ballot initiative to implement a new margin tax in Nevada.  The Judge found four distinct ways in which the description of the initiative's effect was deceptive and misleading.  I'm proud to represent the Committee for Nevada Jobs in its efforts to ensure that Nevadans are adequately informed of the impacts of this ballot petition.  You can read a copy of the Judge's order here:  Download CTPNJ Order 10-23-2012

Gaming and the Mob

I had the opportunity today to co-host an interview with long-time Nevada gaming attorney and former Nevada Gaming Commissioner Paul Bible.  Paul had some fascinating stories about the mob's influence on gaming and how gaming was cleaned up by dedicated regulators.  You can access the video by clicking here.

A Tax By Any Other Name . . .

Over the weekend, the Reno Gazette-Journal ran an editorial suggesting that it's time for Nevadans to consider a corporate "margins" tax.  The Las Vegas Sun wrote that a coalition has formed to push for a margins tax via an initiative petition.  Unsuccessful legislation to enact a margin tax was considered by the Nevada Legislature in the first half of 2011, and was modeled on a similar tax enacted in Texas in 2006.

The Texas Constitution is similar to the Nevada Constitution in that both prohibit an income tax on individuals.  Members of a limited partnership in Texas recently filed a lawsuit alleging that the margins tax violates the Texas Constitution because it is (1) a thinly disguised income tax and (2) the individual income of each partner is their share of partnership profits which is being taxed.  (As a side note, the Texas margins tax has come in well under projections, and continues to cause political headaches for Texas politicians - read more here).

Many Nevadans similarly derive their individual income via a business entity such as a limited partnership, LLC or a pass-through corporation, meaning their individual incomes could well be within the scope of a margins tax - and also meaning the implementation of a margins tax to their income would raise constitutional issues. 

Dawn of a New Era for the Veto?

In 2009, then Governor Gibbons was criticized for vetoing a record 48 bills (8 of those bills pertained to the budget), surpassing the prior record of 33 set in the 19th century.   

In 2011, Governor Sandoval vetoed 28 bills, putting him in third place for vetoes by a Nevada Governor.

Much of the reason for the increase in vetoes can be traced to the fact that beginning in 2009 the Legislature was controlled by one party while the other party held the Governor's Office.  That has only happened three times in the past 50 years (1967, 1979 and 1981). 

So, has the Governor's veto power been overused in the last few years, or has it been historically underutilized by Nevada Governors?   Or has the context of Nevada politics changed to the extent that cooperation and conciliation is less likely between opposing parties?     

It's Not Only State Revenues That Have Declined . . .

As the Governor and Nevada Legislature prepare to enact a budget for the next two years, speculation has been rampant that the state will look to local governments to make up a large part of the deficit.  Local government revenues have historically (at least in the past few decades) been relatively stable, as they are premised in large part on property taxes. 

However, the ongoing recession has significantly impacted both commercial and residential property values, and although assessments traditionally lag behind market shifts, the decline in values is starting to show up.  In Washoe County, taxable values dropped 8 percent.  In Clark County, taxable values dropped significantly more.  The Clark County Assessor notes that last year, the County received $500 million less in tax revenue due to declining property values.  These drops are significant and, in some instances, may translate directly into less local government revenue at the same time the state is considering taking a larger part of county revenues.  (I say "may" translate because some properties, particularly those properties that remain overvalued still have not seen the property tax cap catch up with artificially inflated taxable values, so even a decrease in taxable value can result in an increased tax bill - a subject much too lengthy for this blog entry). 

 Despite the sizable decreases in taxable value, there is still a high likelihood that both commercial and residential properties are overvalued by the county assessor.  By law, taxable value cannot exceed market value.  The tricky part is defining market value.  The methodology used by an assessor to calculate taxable value tends to rely on outdated sales data while discounting relevant market value data as well as discounting economic obsolescence, resulting in a taxable value that often exceeds market value.

The question remains as to how many property owners will appeal their valuations and the level of success they will achieve.  The deadline to appeal property tax valuations is January 18, 2011.  Once the various appeals are resolved, we'll have a better picture about how much revenue local governments can count on from property taxes in the coming fiscal year - and how those tax savings (or decreases in revenue from a government perspective) will play out in the legislative session.

 

 

The Name Game

Some eyebrows recently raised in Nevada when the majority Democrat leadership changed the name of the former "Committee on Taxation" to the "Committee on Revenue."  But, the fact that caucus leadership may change a committee name is nothing new. 

For example, in Colorado the GOP recently took control of the state House of Representatives.  The change in control resulted in "energy" being dropped from the Transportation and Energy Committee, "labor" being dropped from the Business Affairs and Labor Committee, and "human services" being dropped from the Health and Human Services Committee.  Colorado Democrats immediately began criticizing the name change on the grounds that the renaming signaled a change in priorities for those committees.  See the full story here.

Of course, elections have consequences so it shouldn't be too big of a surprise that the Colorado House GOP leadership changed some committee names after winning a majority.  The difference in Nevada?  In 2008-2009, the Democrats held the Senate majority and utilized the Committee on Taxation.  In 2010-11, the Democrats maintained the Senate majority but changed the name to the Committee on Revenue.  So the recent name change is not related to a change in leadership - and time will tell if it actually does signal a change in priorities.

To Elect or Appoint Judges?

This fall Nevada voters will presented with a ballot question that would provide for the initial appointment of judges.  Currently, judges are elected and consequently need to raise money to fund campaigns.  The impact of campaign contributions on judicial impartiality, both real and perceived, is significant. 

 

The proposed reform would amend Nevada law to provide for the appointment of judges by the Governor from a list of candidates selected by the Judicial Selection Commission, followed by retention elections whereby the electorate can choose to retain or remove those judges.  Currently, judges are appointed in Nevada only when there is a vacancy in an existing term of office.  The upcoming ballot question would expand the appointment process beyond vacancies to the initial selection of judges.

 

In my former position in the Office of the Governor, I had the unique opportunity to observe and participate firsthand in the appointment of state judges to fill vacant positions.  During my time in the Office of the Governor, Governor Gibbons appointed six judges to the bench, three to the Clark County District Court and three to the Clark County District Court Family Division.  Given the recent media attention to the merits of appointing versus electing judges, I thought it would be interesting to compare how the appointed judges fared in evaluations compared to the elected judges. 

 

The Las Vegas Review Journal recently released its retention scores of the judges in Clark County for 2010.  The score is a percentage that signifies the percentage of poll respondents who would recommend retaining the judge.  Of the six judges appointed by Governor Gibbons that I was familiar with from when I served in the Governor's Office, the average retention score of those judges was 81.1%.  The overall average retention score of a judge in Clark County (including the appointed judges) was 71.4%.

 

The findings comported with my impression of the appointment process.  The candidates for appointment are forwarded to the Governor from the Judicial Selection Commission, a bi-partisan Commission composed of both lawyers and laypersons.  The Commission conducts extensive background research and interviews the candidates for the position.  The top three candidates, and the background file on each, are forwarded to the Governor.  By law, the Governor must select one of the three candidates and cannot reject all three names and ask for new candidates. 

 

I was struck by the fact that every candidate that came from the Commission was an exceptionally strong candidate for the bench.  The process before the Commission tended to weed out the candidates who did not have the requisite background, experience, demeanor or desire to serve the state as a judge.  The Review-Journal poll results bore out the impression I had that the appointment process on average tends to result in the placement of highly qualified judges. 

 

Super-Sized PACs

An earlier blog post discussed the impact of FEC v. Citizens United on political expenditures in Nevada.  The Las Vegas Review Journal also ran an interesting piece on the same subject.  In the latest developments, the FEC issued advisory opinions that effectively allow corporations and unions to make unlimited contributions to independent expenditure committees (although usual PAC disclosure rules remain in place).  Although those committees are not affiliated with or allowed to coordinate with campaigns, the committees are free to make independent expenditures for or against candidates.  These so-called "super" PACs will undoubtedly be a force in current and future high-stakes elections.

The advisory opinions were issued to the conservative Club for Growth and the liberal Commonsense Ten.  Clearly, groups from both sides of the political pendulum are taking advantage of the opportunity to make independent expenditures. 

State Budget Relief?

With a projected shortfall for the upcoming biennium of somewhere around $3 billion, Nevada's budget is in serious trouble.  However, the latest concept for federal bailout money is aimed at providing fiscal relief to beleaguered states, by way of payments Medicaid payments that are otherwise a serious drain on a state budget. 

Under the Recovery Act, Nevada received around $450 million to help with Medicaid payments.  The current legislation proposes $16.1 billion nationwide.  Although Nevada's ultimate share is unknown (and is of course dependent on the bill passing Congress in the first place), most will view any help as better than no  help at all. 

Perhaps the biggest beneficiaries of the proposed legislation will be the gubernatorial candidates, who may be able to postpone decisions on some tough budget cuts while the legislation winds its way through the capitol.