May 22, 1998

Supermajority Requirements: An Idea Whose Time Should Never Come

by Peter Pratt, Vice President for Health Policy

Earlier this month the Michigan Senate failed to approve a resolution to place on the ballot
a proposal that would amend the state constitution by requiring a two-thirds vote ("supermajority") of the legislature to raise taxes. Fourteen states currently require a supermajority to increase some or all taxes. Some of these states require a three-fifths majority, while others require two-thirds or three-fourths.

The sole rationale for these supermajority requirements is to make it more difficult for states to raise taxes. Supporters point to evidence that states with such requirements have fewer tax increases and experience faster economic growth than other states. A 1996 Heritage Foundation study found that five of the seven states that have had supermajority requirements in place for a number of years experienced slower-than-average growth in revenue and faster economic growth than the average state. On this flimsy evidence, the study concluded, " there is no escaping the logical relationship between supermajorities and superior state performance." A problem with this type of analysis is that the states being compared are not randomly selected but rather self selected; that is, the states that have enacted supermajority requirements are predisposed toward lower taxes and conservative tax policies. Three of the seven states do not have an income tax, and four of the states are located in the south.

Other studies have found that if one measures state and local revenues, adjusts the time period to represent similar points in the business cycle, and looks at different measures of economic growth, supermajority states have had more tax increases and less economic growth than other states.

A recent article in State Tax Notes (May 11, 1998) points out that a supermajority requirement may have a number of unintended and damaging side effects.

• It becomes easier to create special tax breaks than to close them. New tax breaks require a simple legislative majority, but eliminating these tax provisions requires a supermajority vote, which allows them to be protected by a small number of legislators.
• It may lead to a shift in responsibility for funding government services from the state to the local level. This outcome places upward pressure on local property taxes and reduces the ability of the state to provide and finance services in an equitable manner.
• It can lead to costly vote-swapping and an increase in special-interest provisions in budget legislation because a small number of legislators can use their power to hold the majority of legislators hostage to ancillary demands or pet projects in exchange for their vote to raise taxes.
• Most important, it runs counter to the basic democratic principle of majority rule. Rather than allowing each session’s legislators to weigh evenhandedly the tradeoff between spending and tax cuts, these choices are constrained in favor of decisions that supporters of these requirements view as ideologically correct.

There is evidence that these side effects have occurred in at least one state with a supermajority requirement. The California Constitution require a two-thirds majority vote to increase taxes and to enact an annual budget. In a 1995 report, the California Citizens Budget Committee, a bipartisan group of prominent business and community leaders, concluded that supermajority requirements "have not fulfilled their original intentions and have even on occasion worked to the detriment of the state’s budgeting process." The commission found that supermajority requirements lead to increased vote-swapping, contribute to delays in enacting the budget, and encourage the proliferation of tax expenditures. In its final report to be released next month, the commission is expected to recommend that the legislature be allowed to eliminate tax breaks by a simple majority vote.

There is no credible evidence that supermajority proposals accomplish their sole purpose, which is to slow the growth in taxes. With or without supermajority requirements, legislatures typically avoid tax increases. Taxes tend to be increased only as a last resort, such as when a legislature must close a recession-induced budget gap. That has certainly been the case in Michigan. The last major tax increase in Michigan, other than user or replacement taxes, was in 1983 and resulted in the recall of two state senators. During the last recession of the early 1990s, six of the seven states with the broadest supermajority requirements were among 43 states that enacted significant tax increases. Michigan was not among those states. In every state, taxes may be increased only when a strong consensus has developed around a spending goal, such as improving education or roads, and new revenue is needed to achieve that goal. This was the case with Michigan’s 1997 increase in the gas tax, which had been debated for several years and did not pass until strong public support was evident.

The framers of the U.S. Constitution rejected supermajority approval for basic functions such as raising taxes. Such approval was required under the Articles of Confederation, which was the governing document of the United States from 1781 until the U.S. Constitution was enacted in 1789. James Madison, one of the primary authors of the constitution, equated majority rule with "free government." In his view, freedom consisted not just of protecting individuals from unreasonable intrusion by government, but also of the right of citizens to have an equal voice in the affairs of government. According to Madison, a person whose vote is diluted by supermajority rules is not an equal citizen and does not fully enjoy the fruits of freedom. Some ideas are timeless.