The House of Representatives will vote Wednesday on a constitutional amendment that would require a three-fifths supermajority in both the House and Senate for the enactment of any tax increase.
This proposal could not have come at a better time. The ongoing war on terrorism has reduced the once sizable federal surplus, and many leading Democrats, including Sen. Joe Lieberman, D-Conn., have proposed raising taxes by repealing last year's tax cut.
Furthermore, recent evidence from the states indicates that a supermajority requirement would provide an effective safeguard against future tax increases.
Most of the tax increases that have taken place at the federal level have failed to achieve a three-fifths supermajority. The tax increase that President Clinton passed in 1993 won by only two votes in the House and a single vote in the Senate. Similarly, the tax increase that President Bush signed into law in 1990 also failed to receive three-fifths support in either the House or the Senate.
However, the real story about the success of supermajority tax limits comes from recent evidence at the state level. While 13 states have a supermajority requirement on the books, many of those that were enacted prior to the 1990s possess loopholes that limit their effectiveness. For instance, Florida's supermajority requirement that was passed in 1971 pertains only to the corporate income tax. Arkansas' limit exempts taxes on sales and alcohol. Delaware's requirement that was enacted in 1980 is non-binding when the state is running a deficit.
However, the 1990s saw six politically competitive states adopt more stringent supermajority requirements. These requirements, unlike many other states' laws, apply to all tax increases. States that passed such supermajority requirements include Arizona, Colorado, Nevada, Oklahoma, Oregon and Washington. Since current proposals at the federal level do not contain any substantial loopholes, the experiences of these six states should be instructive.
Indeed, data from the National Conference of State Legislators indicates that these supermajority requirements have been very effective at reducing the likelihood of tax increases. When their supermajority requirements were in effect, those six states increased taxes less than 6 percent of all fiscal years between 1992 and 1999. Conversely, states without supermajority requirements raised taxes during 29 percent of all fiscal years over that time span.
Furthermore, a regression analysis, which holds constant a range of economic and demographic variables, indicates that states with strict supermajority requirements were less likely than other states to increase taxes during that time span.
Case studies also provide evidence of the effectiveness of state supermajority requirements. For instance, Arizona, which enacted a supermajority requirement in 1992, faced an unexpected budgetary shortfall last summer. In response, Gov. Jane Hull instructed her state agency directors to reduce their fiscal 2002 budgets by 4 percent. Additionally, Hull called not one, but two special sessions of the legislature to focus on budgetary reductions. These special sessions resulted in over $900 million in budgetary cuts without a single major tax increase.
In contrast, Kansas, which does not have a supermajority requirement, funded its recent budgetary shortfall by increasing a variety of taxes, including the sales tax and the cigarette tax.
Furthermore, this is not the first year that Arizona's supermajority requirement halted a tax increase. In fact, Arizona's only tax increase since the passage of the supermajority requirement was enacted not by the legislature but instead by a popular referendum in 2000. Many would disagree with how a majority of Arizona residents voted on this particular referendum. However, the fact that the legislature has been unable to increase taxes and has been forced to reduce spending provides further evidence of the effectiveness of supermajority requirements.
A constitutional amendment requiring a supermajority for a tax increase has come up for a vote in the House each of the past seven years and every time it has failed to receive the necessary two-thirds majority. Still, regardless of the outcome of the vote on June 12, evidence from the states indicates that supermajority requirements have succeeded in making tax increases less likely and limiting the growth of government. As a result, activists who are interested in limiting taxes at the state level would do well to follow the example of Arizona and other states and enact supermajority requirements.
Michael New is a former research assistant for the Cato Institute. He is currently finishing his Ph.D. in political science at Stanford University.