We’re a few days into Special Session XXXI, which means it’s time to demand the impossible. 

Don’t get me wrong, I get that public sector unions are doing their jobs, which is to represent and defend their members. Their members don’t want pay cuts or furloughs. That’s fair — who does? Yes, the 30 percent or so of Nevadans who lost their jobs before this summer would undoubtedly prefer pay cuts and furloughs to unemployment, and yes, the businesses that laid workers off need more costs imposed on them right now like they need another pandemic-triggered shutdown. 

However, and I mean this earnestly, just because some suffer more than others doesn’t mean that those who are suffering less aren’t suffering. Naturally, when you’re suffering, you want somebody to do something about it. That’s a union’s job — to do something when its members are suffering.

I get it. I think some perspective would be nice, but I get it. 

I also understand the importance of messaging and of shifting the Overton Window — the acceptable range of opinions discussed in policy spaces. I understand that, if you’re a public sector union member, it would be nice if an elected Democrat in state government would respond to an economic crisis by advocating for something other than budget cuts when tax collections decreased. Elected Republicans have been delivering that for decades, after all.

Unfortunately for public sector unions, this is an election year and Democrats need to demonstrate the need to elect more Democrats. They don’t do that by working with Republicans on tax increases, even if there might be one making less obstreperous noises than usual on the subject in the halls this week. They do that by claiming Republicans are impossible to work with and telling voters nothing can change until every Republican in Nevada is elected out of office. Then and only then can Democrats advance a single policy.

I get it. It’s frustrating. I’m not even a Democrat and, though you’ll never see me advocate in favor of a net tax increase, I still almost feel like I’m getting played even though my side’s winning. If it helps you feel any better, the last time a Republican-led special session happened, the first Libertarian legislator in Nevada’s history, in his only two votes as a Libertarian, cast them both in favor of tax increases. 

So, I feel your pain.

Having said that, even if Nevada’s Democrats weren’t playing five-dimensional chess with the hopes and dreams of their supporters, Governor Sisolak is right about two things — raising taxes in Nevada isn’t easy and taxes take time to implement and collect. 

How hard is raising taxes in Nevada? It’s not impossible, but it does require some patience.

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In 1994 and 1996, Nevada’s voters overwhelmingly approved an amendment to the Nevada Constitution that increased the size of the majority required in the Legislature to pass a tax increase. This is the oft-mentioned two-thirds requirement for tax increases, but it’s worth reading in full:

2.  Except as otherwise provided in subsection 3, an affirmative vote of not fewer than two-thirds of the members elected to each House is necessary to pass a bill or joint resolution which creates, generates, or increases any public revenue in any form, including but not limited to taxes, fees, assessments and rates, or changes in the computation bases for taxes, fees, assessments and rates.
3.  A majority of all of the members elected to each House may refer any measure which creates, generates, or increases any revenue in any form to the people of the State at the next general election, and shall become effective and enforced only if it has been approved by a majority of the votes cast on the measure at such election.

Subsection 2 doesn’t just require a two-thirds majority for tax increases — it requires a two-thirds majority for anything that increases public revenue at all. A particularly obstinate interpretation of subsection 2 could conclude that this requirement would apply the instant the state collected a single dollar more in taxes, even if that was the product of inflation or economic growth, than it did the previous year. Historically, however, it has been applied to tax rates, not nominal increases in tax receipts year-to-year. 

Subsection 2 is why the expiration of the payroll tax passed in the last session without a two-thirds majority required some clever hair-splitting. The argument in favor of rescinding the sunset, which is still awaiting consideration in the state Supreme Court, is that the Legislature didn’t approve an increase in public revenue — it merely changed its mind about a planned decrease in public revenue. 

Eliminating mining tax deductions, on the other hand, as Nevada Current’s Hugh Jackson points out, requires a two-thirds majority if the Legislature wants to pass the tax increase itself. Unlike the payroll tax sunset, there are no hairs to split when it comes to eliminating mining tax deductions since they clearly would, to borrow the language of Subsection 2, increase public revenue by changing the computation basis and rates applied towards mining taxes. 

That said, Subsection 3 does give the Legislature an alternative. If a two-thirds majority can’t be found, the Legislature can pass a tax increase with a simple majority. It just won’t be enacted unless voters approve the resulting tax increase in the next general election. That, however, would mean any tax increase passed this way at a special session this year wouldn’t be enacted (if voters approved it) until November 2022 at the earliest.

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Even with a two-thirds majority, or a simple majority backed by a subsequent referendum, the Legislature doesn’t get to pass or increase any old tax.

Article 10 of the Nevada Constitution explicitly prohibits several taxes and caps several others. Income taxes, inheritance taxes, taxes on business inventories, taxes on personal property in transit through or being stored in Nevada, and taxes on shares in stocks and other securities are constitutionally prohibited. Household goods and furniture used by a single household, food for human consumption (except for prepared food and alcoholic beverages), and durable medical equipment are also constitutionally tax-exempt in Nevada. There are also caps on mining taxes, estate taxes, and taxes on bonds, among other things. 

The Legislature, to be fair, can initiate amendments to Article 10 or the rest of the Constitution at any time. It’s not a fast process, however. It takes a majority of both houses in two subsequent legislative sessions to approve an amendment. Once that happens, the amendment is then added to the next general ballot. 

What this means is that, if legislators in a special session this year decided to, say, make constitutional room for an income tax by amending Article 10, they would need a majority vote in both houses in this special session, then a subsequent majority during the 2021 Session, and then the amendment would have to be passed by a majority of Nevada’s voters in the 2022 general election. Then, assuming the income tax itself wasn’t in the amendment (the length of time it takes to amend the Constitution would be a strong argument against putting any taxing language directly in it), the 2023 Session could enact an income tax in statute… if each house passes it with a two-thirds majority. 

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Direct constitutional prohibitions aren’t the only barrier. Many of Nevada’s taxes, such as the Sales and Use Tax Act, were passed by statutory initiative — in other words, Nevada’s voters petitioned and voted directly on them. Since the Legislature doesn’t get to override the direct expressed will of Nevada’s voters, per Article 19, Section 1, Subsection 3 of the Nevada Constitution, such tax statutes cannot be amended or removed except by another statutory initiative.

This is also not a fast process and it involves a lot more work for the rest of us. 

First, a statutory initiative has to be drafted and submitted to the secretary of state. Then, petitioners need to convince at least 10 percent of the voters who voted in the last General Election to sign it. If they succeed, the Legislature will take it up in the next session. If the Legislature does not pass the initiative (without amendment) as law, the initiative appears on the subsequent ballot.

The catch? For an initiative to appear in front of the 2021 session, its drafting language needed to be turned into the Secretary of State by the start of this year. The soonest an initiative drafted today could be considered by the Legislature would be 2023. 

For those of you of a more progressive bent, I will note that the same barriers to amending a tax passed by statutory initiative don’t just apply to increasing such taxes — they also apply to those of us that might seek to reduce or eliminate them outright. 

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Per the governor’s proclamation, this special session is supposed to stick to solutions for the projected general fund revenue shortfall for the current biennium. The current biennium, however, ends at the end of next June, which means any tax measure considered by the Legislature in the special session needs to be enacted and collecting revenue in less than a year. That rules out any tax measures that require amending the Constitution or passing any referenda. 

So, if you’re sitting at home and wondering if the Legislature is going to bring California’s income tax to Nevada, the answer is as firm and straightforward of a “no” as statutory and constitutional language musters in this state.

Even statutorily straightforward taxes passed with two-thirds majorities, however, take time to implement. Staff need to be trained, forms need to be updated, and receipts need to be collected. Ordinarily, this work would be done by the Department of Taxation. However, the governor’s office proposed $4.2 million in cuts to the Department of Taxation’s budget, including 23 layoffs, or roughly half of the layoffs planned for state workers this year. That’s not exactly a vote of confidence. 

This shouldn’t be particularly surprising. Legislative and executive trust in the department took a hit in 2019 after every single branch of state government — yes, including judicial — ended up taking a good, hard look at the department’s implementation of Nevada’s recreational marijuana program. The results weren’t pretty. The Legislature found major discrepancies in the department’s recordkeeping; the courts, meanwhile, had some things to say about the conduct of the department’s senior leadership during the rollout. Since then — “then” being less than a year ago, to be clear — the department hired new leadership and moved most of its recreational marijuana regulatory work to the new Cannabis Compliance Board, which just went live at the beginning of this month.

After everything that happened last year, is it really surprising that nobody in Carson City is excited to give the department more work to do at the moment?

David Colborne has been active in the Libertarian Party for two decades. During that time, he has blogged intermittently on his personal blog, as well as the Libertarian Party of Nevada blog, and ran for office twice as a Libertarian candidate. He serves on the Executive Committee for both his state and county Libertarian Party chapters. He is the father of two sons and an IT professional. You can follow him on Twitter @DavidColborne or email him at [email protected].