Stan Wilmoth is worried. He’s president of a small bank, Heritage Bank of Nevada, that is rooted in the community (it has a lending library of Nevada books for its customers and exhibits the works of local artists in its lobby). It is not likely to flee to a better tax climate or seek to be acquired by a bigger company. It has a stake in what happens in Nevada, and so Wilmoth is worried about a referendum petition, even though the petition has the potential to cut the taxes he pays each year.
The petition seeks to put Senate Bill 8 of the 2003 Nevada Legislature on the ballot for a vote. SB 8 contains the bulk of the funding for state government for two years—the live-entertainment taxes, real-property-transfer taxes, business taxes, licensing fees, gross gaming revenue, cigarette taxes, liquor taxes and others—especially bank taxes.
The taxes hit Heritage Bank hard. “It’s been pretty substantial because we pay 2 percent on payroll versus the— I think it’s .65 [percent] everybody else pays,” Wilmoth said. “So we’re paying over triple what everybody else is paying plus a franchise tax, $7,000 per branch after the first branch.”
So it would hardly be surprising if Wilmoth welcomed the referendum, which would effectively repeal his bank’s taxes, but he does not. He sees it as a no-win situation. If SB 8 is rejected by the voters, the state will be in the biggest budget crisis in recent history, never a happy prospect for financial institutions. Even more important, the Legislature will have to find other revenue sources. Wilmoth fears the lawmakers will turn to a source that was killed in the 2003 Legislature—a gross-receipts tax, a bane to state businesses.
On the other hand, if the voters approve SB 8, it would carve the state tax program into stone because, under Nevada law, once a law is approved by referendum, it can be repealed or amended only with another public vote. Reducing taxes would become a much more burdensome process.
“So if this referendum is going to open up that can of worms again, that is [worrisome],” Wilmoth explained. “You know, I think there may be concern that we may have to have … a special session. So opening that back up to the potential of a gross-receipts tax is very concerning.”
The fact that public votes might be needed to change the tax laws doesn’t bother George Harris, sponsor of the referendum.
“Even if the ballot fails, what it says is that taxpayers will have a say in how government’s operated. Whenever you can get taxpayers [involved] in how government is operated, I think that’s a good thing.”
Wilmoth’s concerns, though, are shared by a growing number of others. Nevada’s oldest anti-tax organization and a key anti-tax legislator have added their voices to criticism of overuse or misuse of the initiative and referendum process in Nevada.
Assembly Republican floor leader Lynn Hettrick, of Douglas County, says he agrees with his Senate counterpart that the legal-petition process is out of hand.
And the Nevada Taxpayers Association (NTA) is preparing to go to court to try to stop the very referendum petition that so concerns Wilmoth if it qualifies for the ballot. (The secretary of state said Tuesday it did not have enough signatures, but supporters are appealing that finding).
A referendum differs from an initiative petition in that it does not propose new law but rather places existing law on the ballot for approval or disapproval. In April, NTA opposed three referendum petitions being circulated to repeal various taxes “due to the concern of unintended consequences.”
This was a reference to the fact that, if the measures are rejected by the voters, it would constitute approval of those sections of law, making any changes subject to public vote, effectively locking the tax hikes into law.
NTA Director Carole Vilardo says, “I think when you’re dealing with taxes, most people think that when they do something like this, they’re getting the ability to vote on the [tax] rates.” Instead, she says, the danger is that they’ll lock in the taxes instead of cutting them.
Seventy-one percent of her board of directors voted for the lawsuit against the referendum, and the group is likely to retain former Washoe state Senator Thomas “Spike” Wilson to handle the suit. Wilson represented NTA in its anti-tax court filings during the 2003 Legislature.
Hettrick’s comments came after Senate Republican floor leader Bill Raggio told the Reno Downtown Rotary (RN&R, July 29) that citizen initiatives can cost taxpayers money in ways they never imagined when they voted for them.
Hettrick says he sides with Raggio in part because he believes ballot petitions are often sold to voters with slick but misleading sales pitches.
“The initiative/referendum process is overused,” Hettrick says. “The signature gatherers use ‘sound bites’ to encourage people to sign. Meaningful explanations of the positive and negative impacts are not available.”
As it happens, in court Wilson is expected to argue vagueness in the SB 8 petition, and Nevada Secretary of State Dean Heller early on urged the petition’s supporters to include more language on the petition to explain to people what they were signing.
Harris was dismissive of Hettrick’s comments.
“That’s the biggest crock of horseshit I’ve ever heard in my life because here’s the bottom line: The constitution of the state of Nevada allows the people to redress their government [through ballot petitions]. I don’t know what rocket science he’s talking about, but people are intelligent enough to understand that they want to repeal taxes.”
“We certainly believe in our minds that we did everything in our power to get the Legislature not to raise taxes three times the rate of population and inflation … so we turned to the constitution, and the constitution gave us an avenue in which to redress our government,” he added.
Hettrick and Raggio were leaders of opposing factions in the Nevada Legislature’s monumental stalemate over a new tax plan for the state. Hettrick led 15 GOP Assembly members who kept the lawmakers deadlocked through the regular legislative session and two special sessions under a minority-control provision of the Nevada Constitution that lets as few as eight members of the 63-member Legislature block a tax hike. The provision that empowered the 15 was inserted in the constitution by an initiative petition.
But Hettrick says petitions are a poor substitute for real lawmaking, since the campaign setting doesn’t allow the weaknesses of proposed laws to be revealed by forcing sponsors of legislation to explain and document their cases, as is often done in legislative committees. In fact, Hettrick has written, sponsors of petitions sometimes do not have the good of the whole community or state at heart.
“To me, the typical petition is much like a person playing with a Rubik’s Cube. All they care about is having a white square [their issue] on the front side in the center. They don’t care what the rest of the cube looks like [the impacts]. While there should be a process for the public to address issues they feel government is handling poorly, it should be more difficult and should require better explanations and documentation to back up statements made.”
However, the process has already been made more difficult without solving the problem. In 1958 and again in 1988 ballot petition requirements were made tougher, but the only effect has been to put them out of reach of the grassroots citizens they were originally designed to help while keeping them available to well-heeled or especially dedicated special-interest groups.