- The Washington Times - Sunday, March 9, 2003

Deficits are everywhere this winter. California is currently facing the worst fiscal crisis in its history asGov. Gray Davis recently proposed an $8 billion tax increase to help offset his state's $34 billion budgetary shortfall. However, the situation is not much better elsewhere as state treasuries are running a combined deficit of approximately $70 billion. Not surprisingly, many states are resorting to tax increases to balance their budgets. However, not all states are raising taxes. In fact, unreported throughout this fiscal crisis has been how supermajority tax limits are causing many state legislators to forgo tax increases in favor of budget cuts.
Indeed, during the past 10 years, supermajority tax limits have been increasing in popularity. This is partly because of a shift in strategy by anti-tax activists. During the late 1970s and early 1980s, property tax limits were the favored mechanism by those seeking to reduce the growth of government. Indeed, California's Proposition 13 and Massachusetts' Proposition 2 were among the most successful of these efforts to reduce and limit property taxes.
However, as states and localities became less reliant on property taxes, fiscal conservatives began to promote broader limitations on government, including supermajority requirements. Indeed, since the early 1990s, six states Arizona, Oklahoma, South Dakota, Nevada, Louisiana and Oregon have enacted laws requiring that tax increases must receive supermajority approval in both chambers of the state legislature. Furthermore, Colorado's Taxpayer Bill of Rights (TABOR), which establishes a low limit for state budgetary growth, also requires legislative supermajorities for the enactment of any tax increases.
Still, it has been difficult to determine the effectiveness of these recently enacted supermajority requirements. During the economic expansion that took place throughout the mid- to late 1990s, state coffers were flush with revenue and relatively few states were raising taxes. However, last year's widespread budgetary shortfalls have provided plenty of evidence to demonstrate the effectiveness of supermajority tax limits.
For instance, during the recession in the early 1990s, Colorado, Arizona and Oregon all substantially increased income and gasoline taxes to balance their budgets. However, the subsequent enactment of supermajority requirements dramatically changed fiscal policy in these states. In fiscal 2002, those three states balanced their budgets not by raising taxes but through spending cuts. Overall, Colorado, Arizona and Oregon cut their fiscal 2002 budgets by a combined $2 billion, without increasing a single tax.
The story is similar in other states with supermajorities. In fiscal 2002, Nevada made modest cuts of $31 million, without increasing a single tax. Another supermajority state, Louisiana, was one of only a few states that actually reduced taxes. Finally, Oklahoma cut spending by $173 million and raised taxes by only a modest $60 million. Even better for Oklahoma residents, much of the projected increase in tax revenue comes not from a rate increase, but instead from a tax amnesty program. Overall, in fiscal 2002, these six supermajority states enjoyed a spending-cut-to-tax-increase ratio of about 36-to-1. In comparison, the national average was approximately 1-to-1.
Finally, a supermajority requirement might even spare California taxpayers the burden of a painful tax increase. California's Proposition 13 is best known for its provisions that reduced state property taxes. However, it also contained a supermajority requirement. Now California's supermajority requirement has not been able to stop all tax increases. But during the budgetary shortfalls in the early 1990s, the supermajority rule did increase the bargaining power of the Republican minority in the State Assembly. That resulted in fewer tax increases and more spending cuts than what was originally proposed by former Gov. Pete Wilson. With Assembly Republicans currently vowing to oppose all tax increases, history may well repeat itself in 2003.

Michael J. New is an adjunct scholar at the Cato Institute.

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