“From the title down, the initiative is deeply flawed and misleading,” said Josh Hicks, one attorney representing the Committee to Protect Nevada Jobs, a coalition of various business organizations.
The tax proposal is sponsored by the Nevada State Education Association and Nevada AFL-CIO. The Education Initiative is modeled after a similar tax structure in Texas and would impose a 2 percent margins tax on businesses that gross more than $1 million annually.
Gary Peck, executive director of the NSEA teachers union, said the lawsuit was no surprise.
“We’re hardly surprised a legal challenge was filed; hardly surprised at the parties who are involved in the challenge,” Peck told The Associated Press. “They have a long track record of opposing any effort to increase much needed revenue in the state, even much needed revenue to pay for an adequate K-12 education system.”
When it was filed June 6, the president of the NSEA teachers union estimated the tax would raise $800 million a year. Lynne Warne said the revenue would go the state’s general fund, making more money available for K-12 education.
But Hicks said, “the initiative has nothing to do with education and includes many aspects that are not mentioned in the initiative’s description. We believe that as written, this initiative violates Nevada law.”
The Committee to Protect Nevada Jobs’ lawsuit argued that the initiative doesn’t require education funding be increased over current levels.
“Quite clearly, this initiative is designed solely to increase general tax revenues and to take advantage of citizen’s concerns about education in order to mislead them into signing the petition and, later, into voting for it,” Hicks said. “Nevada law is quite clear in prohibiting such deceptions.”
The suit also targets another provision that would temporarily increase the state’s existing modified business tax rate on financial institutions to raise money necessary for the Nevada Department of Taxation.
It argued the $5 million from the state general fund referenced in the initiative are insufficient to cover the actual cost to administer the tax.
Warne and Danny Thompson, secretary-treasurer of the Nevada AFL-CIO, earlier said they anticipated legal challenges and delayed signature gathering for that reason.
If the initiative survives the legal hurdles, supporters will need to collect more than 72,000 signatures by Nov. 13 to send the proposal to the 2013 Legislature.
If lawmakers reject it or fail to act, it would automatically go to voters in 2014.
“We are exceedingly confident the initiative will withstand the challenge and we will gather the requisite signatures to get it before the Legislature,” Peck said. “And if the Legislature doesn’t pass it, then we are confident the voters will.”