Policy Basics: State Supermajority Rules to Raise Revenues

PDF of this policy basics (3pp.)

April 22, 2013

Legislatures in most states (34 states plus the District of Columbia) can approve tax bills with a simple majority vote in each house, the same margin required for practically every other bill.  In the other 16 states, some or all tax bills require a supermajority vote of each house (plus the governor’s signature).

Most states with supermajority requirements impose them only in limited circumstances, but in seven states, the constitution requires a supermajority vote of each house, plus the governor’s signature, to enact any bill that includes a tax increase.  Delaware, Mississippi, and Oregon require a three-fifths vote of each house, while Arizona, California, Nevada, and Louisiana require a two-thirds vote of each house. 

Supporters argue that supermajority requirements keep state taxes lower than they otherwise would be.  In reality, however, states with strict supermajority requirements levy taxes at a nearly identical level as other states, on average.  In both groups of states, state and local taxes have remained flat as a share of personal income for three decades (see chart).

That’s because states don’t need supermajority requirements to ensure that taxes will remain manageable, that major tax increases will be rare, and that lawmakers will think very carefully before raising taxes.

States usually enact major tax increases only in the aftermath of recessions, when revenues have fallen well short of the cost of maintaining public services — and generally accompany them with deep spending cuts.  Moreover, states almost always offset recession-driven tax increases by cutting taxes in good economic times.  For example, states as a whole raised personal and corporate income taxes in 1993 and 1994, following a recession, but then cut these same taxes for eight straight years.

Beyond being unnecessary, supermajority rules can weaken a state’s capacity to properly handle its finances by:

  • Protecting outdated and wasteful tax breaks.  In many cases, repealing a tax break is considered a tax increase subject to the supermajority requirement.  This means that costly deductions, credits, and other tax expenditures that don’t work as intended or have outlived their usefulness have more protection than other types of spending, which lawmakers can change by a simple majority vote. 
  • Shifting costs from some residents to others.  When raising taxes and repealing tax breaks are subject to supermajority requirements, lawmakers are more likely to raise needed revenue by hiking fees, tuition, and other levies not subject to the requirements.  They are also more likely to reduce support for local governments, which may need to raise property taxes as a result.  Such actions shift the cost of government from some taxpayers to others — students, Medicaid recipients, and homeowners, for example.
  • Raising the cost of capital investments.  Research shows that investors are less willing to buy bonds from states with supermajority tax requirements.  This is because such rules reduce states’ flexibility to raise revenue, making them less trustworthy borrowers in the eyes of investors and bond rating agencies.  Supermajority states thus are more likely to have lower bond ratings, forcing them to make higher interest payments to investors and pushing up the cost of new schools, university facilities, and other bond-financed projects. 
  • Making it harder to finance transportation investments.  Most states fund highway and other transportation projects through gasoline taxes that are not indexed for inflation.  To keep up with rising highway-construction costs, therefore, states must periodically raise gasoline tax rates.  Supermajority rules make that more difficult.  Five of the seven strict supermajority states have not raised their gas taxes in over 15 years, while most other states have raised them at least once in the last decade.
  • Limiting lawmakers’ options during recessions.  The best approach to combating recession-induced budget gaps is usually a balanced one that includes both revenue increases and targeted spending cuts.  By making it harder to raise taxes, supermajority rules encourage states to close gaps mostly if not entirely through spending cuts, which can inhibit a recovery. 
  • Expanding the power of special interests.  In supermajority states, a small minority of lawmakers and special-interest lobbyists can hold even the most popular legislation hostage, demanding narrow concessions or the inclusion of expensive pet projects.  And supermajority rules make it much easier for lobbyists representing a few corporations or other taxpayers to protect existing tax breaks for these narrow interests.

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