April 25, 2006
A “SUPER” BAD IDEA:
Requiring a Two-thirds Legislative Supermajority to Raise Taxes
Protects Special Interest Tax Breaks and Gives
Budget Veto Power to a Small Minority of Legislators
Enactment of state legislation normally requires
approval by a majority vote in each house of the legislature plus the governor’s
signature. Anti-tax activists in Kansas, however, are proposing to require
a two-thirds supermajority vote of each house of the state legislature plus the
governor’s signature in order to enact any bill that includes a tax increase.
Such a supermajority requirement would be
- Tax breaks, even those narrowly targeted to
special interests that fail to serve the public interest, would gain additional
protection under the amendment because ending the tax break would be considered
a “tax increase.” In addition, tax breaks enacted at the federal level
that automatically lower Kansas taxes, even those that do not benefit Kansas
residents, would be extremely difficult to remove from the Kansas code because
their removal would be considered a tax increase subject to the two-thirds vote
- A supermajority requirement would increase the
power of a small minority of legislators. In years in which a tax
increase is necessary to balance the budget – for example, because of a
recession, natural disaster, or other unforeseen circumstance – a small number
of Kansas legislators in either house (42 of 125 representatives, or 14 of 40
senators) could prevent the majority from enacting a balanced budget.
This minority could use its veto power to extract special favors or projects;
evidence from other states such as California suggests that a supermajority
requirement increases pork barrel spending. Or they could effectively
shut down the budgeting process if their demands were not met.
- A supermajority requirement would have its
largest impact during economic downturns. Kansas is required to balance
its budget each year. During a recession, when state budget deficits
must be closed, the most evenhanded way to do so usually involves a mix of
expenditure cuts and tax increases. Excluding revenue increases as a
budget-balancing strategy would make the task of balancing the budget much
more difficult, and would necessitate even larger service reductions than
would otherwise be required.
- A supermajority amendment would increase
uncertainty, and perhaps judicial intervention in state budget decisions.
For instance, the dividing line between “tax” increases and “fee” increases is
not always clear. The legislature might, for example, balance the budget
with what it considered a fee increase not subject to the supermajority rule,
only to have a judge disallow the fee increase because it is determined to be
a tax that should have required a two-thirds majority – and thereby throw the
budget out of balance mid-year.
- Kansas policymakers have historically shown
great reluctance to raise state taxes, suggesting a supermajority requirement
is quite unnecessary. Tax burdens relative to income in Kansas have
changed little in the last 30 years. Like most other states, Kansas cut
taxes in the late 1990s and raised them in the early 2000s. But Kansas
remains an average-tax state.
- Enactment of a supermajority requirement would
move Kansas along a path toward even more restrictive limits on legislative
fiscal flexibility and accountability. In several states with
supermajority requirements, including Arizona, California, Nevada, Oklahoma,
and Oregon, political supporters of the requirement have used it as a
steppingstone toward promoting such measures as a Colorado-style TABOR.
A campaign for a supermajority requirement becomes merely one step in a
multi-year campaign designed to severely restrict the ability of the
legislature to meet the state’s needs.
The Amendment Would Make It Difficult to Close
The requirement for a two-thirds supermajority
would apply not only to measures to raise tax rates but also to measures to
reduce or eliminate unproductive tax breaks that have been enacted in earlier
years. These so-called “tax expenditures” grant narrow, often unproductive
subsidies to powerful special interests, and often persist in the tax code even
when they no longer have a valid policy purpose. Such “tax expenditures” can be
very valuable for specific individuals, corporations, or industries who lobby
for them, but they have the effect of driving up tax rates for everyone else in
order to compensate for the lost revenue.
California's experience with a constitutional
supermajority requirement for raising taxes bears out this concern. The
California Citizens Budget Commission, a distinguished bipartisan panel of
business and community leaders formed in 1993 to study the state's budget
problems, reported that the state's supermajority requirement "makes it
relatively easy to enact tax breaks but difficult to repeal them." The
Commission recommended the state Constitution be changed to allow the
legislature to narrow or eliminate tax breaks by a simple majority vote, so that
it would be as easy to eliminate tax breaks as to create them.
A particular problem might result if Kansas
were to enact a tax break that turned out to be far more expensive than
originally thought. Such an error is uncommon but far from unheard-of; in
recent years, states as diverse as Arizona and Maryland have made headlines by
enacting tax credits that turned out to be far easier to claim — and therefore
had far greater impact on the state treasury — than was originally intended when
the credit was enacted. (In Arizona’s case, it was a tax credit for
low-emission vehicles; in Maryland’s case, it was a tax credit for historic
preservation.) Under a supermajority requirement, reversing or tightening up
the rules for the credit would require a two-thirds vote. The history in other
states such as California suggests that could be difficult to obtain.
Legal Scholar Warns of
Perverse Effects, Including Increased
Difficulty in Stanching Unintended Revenue Losses
At the federal level, a similar two-thirds
requirement has been considered and rejected by Congress several times in
the last decade. In testimony before the Subcommittee on the Constitution
of the House Judiciary Committee on March 18, 1997, Samuel C. Thompson,
then Dean of the University of Miami Law School, warned of potential
perverse consequences from a constitutional amendment requiring a
supermajority vote to raise revenues. Thompson stated:
“[The amendment] will have the effect of
making it much harder for Congress to close tax loopholes, because any
such legislation could be blocked with a mere 34 percent vote in either
house of Congress....
“The core problem
with this proposed constitutional amendment is that it would give special
interest groups the upper hand in the tax legislative process. Once a
group of taxpayers receives either a planned or unplanned tax benefit with
a simple majority vote of both houses of Congress, the group will then be
able to preserve that tax benefit with just a 34 percent vote in one house
of Congress. Thus this amendment would create an un-level playing field in
the tax legislative process.
“Indeed, I believe
that if enacted this amendment would become known as the ‘Tax Loophole
Preservation Amendment to the Constitution.’"
Thompson has served in the Treasury
Department's Office of Tax Legislative Counsel and has taught tax law at
UCLA, the University of Chicago, the University of Miami (serving as Dean
of the Law School), Northwestern University, the University of Virginia,
and Yale University.
Federal tax policy changes could become highly
problematic for Kansas under a supermajority requirement; the supermajority
requirement could sap Kansas’s ability to make judgments on revenue issues that
differ with federal policy. Kansas’ personal income tax and corporate income
tax are tied automatically to the federal definitions of adjusted gross income
and taxable income. This means that when Congress enacts a measure that reduces
the income tax base, it automatically flows through to reduce Kansas revenues,
unless Kansas specifically acts to “decouple” from that provision.
For example, the federal government is now
phasing-in a tax break known as the “qualified production activities income”
deduction. This tax break will have negligible economic benefits at the state
level, because multistate corporations can claim the tax break for either
in-state or out-of-state investments. But states that conform to it will lose
substantial revenue (an estimated $12 million to $16 million per year in Kansas,
for example). Some 19 states have already chosen to decouple their tax codes
from this deduction.
In Kansas, however, such an adjustment would require a supermajority under the
amendment, because it would technically be a tax increase.
It is not clear why such a federally enacted tax break should enjoy such an
extraordinary level of protection.
The federal government is considering new tax
breaks to corporations that invest in the portions of the Gulf Coast affected by
Hurricane Katrina. As a result, some corporations with Kansas operations that
invest in Louisiana, Mississippi or Alabama would receive a break on their
federal taxes, and by extension on their Kansas taxes as well. With a
supermajority requirement, Kansas lawmakers would find it more difficult to
prevent such tax breaks for non-Kansas investments from reducing the services
Kansas can afford for its own residents.
The Amendment Would Empower a Minority of
Balancing a state budget is a challenge,
particularly during difficult economic times. A supermajority requirement would
make it even harder, because a budget that included any revenue-raising measures
could be blocked by just 42 of the state’s 125 House members or 14 of 40
Senators. This would give unusual level power to a small number of
The task of persuading two-thirds of each house
of the legislator to support tax changes is made still more difficult by the
decision by several Kansas legislators to take a “no-taxes” pledge. Americans
for Tax Reform, an anti-tax group, reports that as of October 2005, 10 members
of the Kansas Senate and 21 members of the Kansas House have signed a pledge to
“oppose and vote against any and all efforts to increase taxes.”
These pledges do not allow exceptions for any circumstances. Were those pledge
signers (or a comparable number of pledge signers in a future legislature) to
stand by their commitment, a tax increase would require 27 of the remaining 30
senators and 84 of the remaining 104 representatives.
The Amendment Could Make It Difficult to Finance
In Kansas, most highway and other transportation
projects are funded through the State Highway Fund , which in turn is funded
largely by state gasoline taxes. Kansas gasoline tax rates are not indexed for
inflation, but highway-construction costs inevitably rise over time. As a
result, gasoline tax rates must be periodically increased just to keep up with
construction costs. Kansas enacted gasoline tax increases in 1999 and again in
2002 to pay for highway projects.
A supermajority requirement would make it
substantially more difficult to finance road projects, even those with broad
support. A small number of legislators in either house of the legislature – for
instance, a coalition of anti-tax conservatives and anti-highway
environmentalists, drawn from the extremes of the political spectrum – could
block measures that otherwise command broad support.
The Amendment Could Increase Pressures for
The proposed supermajority requirement could
result in the expansion of special-interest projects. The two-thirds requirement
would empower individual legislators to demand state funding for pet projects in
return for agreeing to provide the necessary votes so legislation containing
revenue-raising measures could obtain two-thirds support and pass. To be sure,
such vote-swapping can occur whether revenue-raising measures require a simple
majority or a supermajority. But as the California Citizens Budget Commission
noted, the degree of vote-swapping tends to intensify as the level of difficulty
needed to obtain the necessary votes to pass a budget increases. The level of
difficulty is much greater when a two-thirds supermajority is required.
The Commission found evidence that California's
requirement for a two-thirds majority to pass budgets has led to enactment of
substantial "pork-barrel" legislation that individual legislators have promoted.
Supermajority requirements present legislators with tempting opportunities to
threaten to block revenue-raising measures that a majority favors unless the
majority accepts various pet projects or programs these legislators are pushing.
The Amendment Would Hinder Balanced Budget
Decisions During Economic Downturns
States are required to balance their budgets. As
a result, many states cut taxes and expand the provision of public services
during economic expansions as their tax bases expand, and many states increase
taxes and reduce services during economic downturns as their tax bases shrink.
The ability to consider both sides of the budgetary ledger – taxes and spending
– gives legislators room to utilize a wide range of strategies in order to best
meet the needs of their constituents during good times and bad.
During a recession, when state budget deficits
must be closed, the most evenhanded way to do so usually involves a mix of
spending cuts and tax increases. Most state governments – including those
controlled by Republicans, those controlled by Democrats, and those with mixed
party leadership -- follow this approach. In both the economic downturn of the
early 1990s and that of the early 2000s, for instance, a majority of states
raised taxes as well as reduced expenditures.
Under a supermajority requirement, a budget that
is balanced entirely with spending cuts would require only a simple majority of
each house of the legislature, while a budget that relies both on spending cuts
and on tax increases to achieve balance would require a two-thirds vote of each
house. The most likely outcome in a difficult budget year would be a budget in
which the entire burden of compensating for the reduced revenues and increases
costs that occur during a recession is met through reductions in state
Relying entirely on spending cuts to balance the
budget would mean that the cuts would be deeper than they would be under a more
balanced approach, with likely adverse consequences for public K-12 schools,
health care, universities, transportation, and public safety (which are the
major spending items in the Kansas budget).
Supermajority Rules Invite Judicial Intervention
A supermajority amendment would increase
uncertainty and perhaps judicial intervention in state budget decisions. For
instance, the dividing line between “tax” increases and “fee” increases is not
always clear. A simple majority of each house of the legislature might, for
example, balance the budget with what it considered a fee increase not subject
to the supermajority rule. A taxpayer might then challenge the fee increase as
violating the supermajority rule. At best, such a challenge would throw the
validity of the budget into doubt; at worst, a judge could disallow the fee
increase and potentially throw the budget out of balance mid-year.
Taxes in Kansas Have Been Flat for Thirty Years
and Are Average Among the 50 States.
The argument for a supermajority requirement
appears to rest on the premise that an extraordinary rules must be enacted to
head off Kansas lawmakers’ predilection for tax increases. In fact, there is no
evidence that Kansas policymakers are particularly prone to raising taxes. Like
most states, Kansas has cut taxes during economic expansions and increased them
during economic downturns. Overall, total taxes in Kansas have changed little
as a share of the economy since 1970. This suggests that Kansas lawmakers
probably represent the views of their constituents, who appear to desire a
reasonable tax burden that is sufficient to pay for adequate public services.
State and local taxes in Kansas have been
virtually unchanged as a share of the economy over the last 35 years. Kansas
tax collections in 2005 equaled 11.8 percent of personal income, the same level
as they were in 1970 and approximately the same level as they were in 1980,
1990, and each of the last ten years, according to data from the Kansas
Department of Revenue.
Kansas presently collects a level of revenue that
is average among the 50 states. Using the latest available U.S. Census Bureau
data, the Rockefeller Institute of Government finds Kansas has the 26th highest
level of state and local taxes per capita among the 50 states. Kansas also has
the 26th highest level of state and local taxes as a share of personal income.
(These Census data are recognized widely as the only comprehensive survey of
state and local government finances that allows for state-to-state
comparisons.) Using a slightly broader measure – total general revenue --
Kansas is below average with the 34th highest level of total state and local
general revenue per capita and the 35th highest level of total state and local
general revenue as a share of personal income.
A Supermajority Requirement May Place a State on
a Path Toward Even More Restrictive Limitations Such as TABOR.
A supermajority requirement could move Kansas in
the direction of enacting a full-fledged “Taxpayers’ Bill of Rights” or “TABOR”
amendment like the one that was enacted in Colorado in 1992. In Colorado,
TABOR, has led to declines in funding for K-12 schools, higher education, health
and hospitals, among other areas.
TABOR supporters favor a supermajority
requirement if they cannot enact TABOR this year, as a second-best policy.
It is tempting to believe that by enacting a constitutional amendment that is
not as extreme as TABOR, such as the proposed supermajority requirement, Kansas
might in the longer term avert a more restrictive limit such as TABOR. This is
not likely to be the case, and in fact the reverse may be true.
The experiences of states like Arizona,
California, Nevada, Oklahoma, and Oregon – each of which already has a
supermajority requirement to raise taxes – are instructive. In each case,
political supporters of a supermajority requirement have been strengthened by
their success and have used that additional strength to build momentum for even
more restrictive limits. Indeed, three of those states (Nevada, Oklahoma, and
Oregon) presently face strong movements to enact Colorado-style TABOR limits.
In each of those states, the campaign for a supermajority requirement appears to
have been merely one step in a multi-year campaign designed to severely restrict
the legislature’s flexibility and capacity to enact appropriate tax policies.
 A 21st Century Budget Process for
California: Recommendations of the California Citizens Budget Commission
(Los Angeles, Center for Governmental Studies, 1998).
 Elizabeth McNichol and Nicholas
Johnson, States Are Decoupling From The Federal Qualified Production Activities Income” Deduction, Center
on Budget and Policy Priorities,
 Americans for Tax Reform, “Pledge
(accessed October 20, 2005).
 Reforming California's Budget
Process: Preliminary Report and Recommendations of the California Citizens
Budget Commission, (Los Angeles: Center for Governmental Studies, 1995),
 Rockefeller Institute of
Government, “State Fiscal Rankings,”
http://rfs.rockinst.org/data/fiscal (accessed October 21, 2005).