Nevada Supreme Court rejects Democrats’ arguments, axes $107 million in payroll taxes

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In this Feb. 27, 2013, file photo, Nevada Sen. James Settelmeyer, R-Minden, listens on the Senate floor at the Legislative Building in Carson City. Nevada state lawmakers are bound by a state constitutional requirement to reach a two-thirds majority to approve revenue-generating decisions, the state Supreme Court decided Thursday, May 13, 2021. (AP Photo/Cathleen Allison, File)

CARSON CITY — The Nevada Supreme Court ruled on Thursday that Democratic state lawmakers were wrong to continue a payroll tax without a two-thirds majority approval.

The controversy over the Modified Business Tax has lingered for two years since Republicans challenged a move by Democrats to continue the tax, which should have expired in 2019. Instead of sunsetting the tax, Democrats continued it, arguing the money was needed for education.

The ruling means $107 million in payroll taxes will have to be refunded to employers.

The state Supreme Court cited “plain language of the supermajority provision” in the law, ruling on the side of Republican James A. Settelmeyer and seven other members of the Nevada Senate, along with a dozen companies and corporations listed as plaintiffs.

The unanimous ruling rejected arguments by Democrats.

The court also concluded that individual Democratic legislative leaders were not personally liable for costs in the case.

Democrats reacted bitterly to the decision.

A joint statement from Majority Leader Nicole Cannizzaro and Speaker Jason Frierson said:

In 2019, the Legislature blocked an unnecessary corporate tax cut and instead funded raises for educators and critical school safety infrastructure. In response, Legislative Republicans made it their primary mission over the last two years to protect the bottom lines of some of the state’s largest corporations at the expense of Nevada schools. It is disheartening that Nevada families must pay a price for a lawsuit from colleagues who were unwilling to stop playing partisan politics with our children’s education dollars. Despite their misguided decision to push forward, even in the face of unprecedented shortfalls to our state’s budget this past year, we will continue to seek ways to require large, profitable corporations to pay their fair share and support Nevada families. Going forward, we call on our colleagues to work with us on meaningful revenue legislation this session.

The ruling comes as Nevada’s Economic Forum reported glowing forecasts for the recovery from the COVID-19 pandemic, with $586 million in tax revenue available.

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