Research & Commentary: Oklahoma Should Not Weaken Its Supermajority Tax Requirement
In this Research & Commentary, Matthew Glans examines a bill in Oklahoma that would ask voters to reduce the state’s supermajority requirement for tax increases, a move that would make it easier for the legislature to increase taxes.
Oklahoma legislators are now considering asking voters to reduce the state’s supermajority requirement for tax increases, a move that would make it easier for the legislature to increase taxes. The new bill would lower the state constitution’s three-fourths requirement needed to pass a tax increase to a two-thirds requirement.
Fifteen states currently require a supermajority to approve a tax hike or a new tax. The most recent state to impose a supermajority was California, which passed its measure in 2016 as part of activists’ “Stop Hidden Taxes” initiative. Florida will send a new supermajority question to voters in November.
Oklahoma’s supermajority requirement was implemented in 1992, when voters approved State Question 640, which requires any bills increasing revenue through taxes and fees receive a three-fourths vote in both the House and Senate and be approved by the state’s governor to become law. The requirement also allows tax increases to be permitted when a majority of voters on a statewide ballot approves an increase.
These measures have slowed the rate at which tax increases have been imposed in the state; only one tax increase has occurred since the requirement was passed – a tobacco tax increase in 2004.
Oklahoma can ill afford new or increased taxes. The state already places an unneeded burden on taxpayers and the economy. Oklahoma ranked 32nd in the Tax Foundation’s 2018 State Business Tax Climate Index, a study that compares states’ tax schemes affecting businesses. Oklahoma’s ranking is lower than many of its neighboring states, including Texas (13th), Missouri (16th), Colorado (18th), and Kansas (23rd).
In his testimony before the Maryland House Committee on Ways and Means on a similar supermajority bill, Joseph Henchman of the Tax Foundation argued imposing a supermajority threshold for tax votes empowers the minority in legislatures and ensures any tax passed has reached consensus and received full consideration. “The additional consideration also sends the signal that tax increases will not happen suddenly, and the additional legislative give-and-take reduces the chance that a minority will alone bear the burden of higher taxes. This increased stability in turn furthers the certainty required for investment, capital formation, and job creation,” Henchman wrote.
In a 2014 article, Soomi Lee of the University of La Verne and the Claremont Institute of Economic Policy Studies examined whether supermajority vote requirements (SMVR) to raise taxes in California’s constitution suppresses state tax burdens. Lee examined the causal effect of SMVR on tax burdens in California between 1979 and 2008 and found, “SMVR reduced the state nonproperty tax burden by an average of $1.44 per $100 of personal income, which is equivalent to 21% of the total tax burden for each year. The effect of SMVR was immediate after its adoption, but has abated over time.”
Oklahoma should not reduce the effectiveness of its supermajority requirement, a proven method of reining in out-of-control state budgets. Instead, states must learn to live within their means by adopting reforms that limit spending. Limits on government spending force policymakers to more closely monitor and carefully control state spending, thereby properly balancing budgets while limiting the need for future tax hikes.
The following documents cover tax reforms and supermajority vote requirements in greater detail.
The Effect of Supermajority Vote Requirements for Tax Increase in California: A Synthetic Control Method Approach
In this study, Soomi Lee of the University of La Verne and the Claremont Institute of Economic Policy Studies examined whether supermajority vote requirements needed to raise taxes in California’s constitution suppresses state tax burdens.
Why a Tax Limitation/Balanced Budget Amendment Is Needed to Control Spending
Daniel Mitchell of The Heritage Foundation argues in this report a “strong provision to limit taxes – such as a two-thirds supermajority requirement to raise taxes – would help ensure that politicians could not evade the amendment's intent by simply replacing debt-financed spending with tax-financed spending.”
Supermajority Taxpayer Protection
Peter Ferrara writes for Americans for Tax Reform about supermajority requirements and how they have “proven highly effective both in protecting taxpayers and boosting the economy. Polls and actual votes taken in referenda show the provision is highly popular with voters,” wrote Ferrara.
Supermajority Vote Requirements
The National Conference of State Legislatures examines supermajority vote requirements across the country and how they have been applied in different states.
State Budget Reform Toolkit
The American Legislative Exchange Council outlines a set of budget and procurement best practices to guide state policymakers as they work to solve the budget shortfalls. The toolkit will assist legislators in prioritizing and more efficiently delivering core government services by advancing free markets, limiting government, and promoting federalism and individual liberty.
Policy Tip Sheet: Spending Reforms
The Heartland Institute outlines several reforms state legislators can take to address spending problems, including privatization, tax and expenditure limits, and retirement reforms.
Balancing State Budgets the Smart Way
Joseph Henchman of the Tax Foundation examines an array of options states can use to remedy both short-term and long-term fiscal woes and put their budgets back on sounder legal footing.
State and Local Spending: Do Tax and Expenditure Limits Work?
This empirical analysis by Benjamin Zycher of the American Enterprise Institute applies data from 49 states (excluding Alaska) over the period 1970–2010 to the empirical question of the effectiveness of TELs, which display a wide variety of features across the states.
Tax and Expenditure Limits for Long-Run Fiscal Stability
Emily Washington and Frederic Sautet of the Mercatus Center examine how states can correct for the inflexibility inherent in state expenditure systems to respect taxpayers’ desires for government services over time. Although they are not a perfect solution, binding TELs prevent policymakers from increasing state spending beyond voters’ willingness to pay for government services, the authors argue.
What Is the Evidence on Taxes and Growth?
In this Tax Foundation study, William McBride examines the effects of tax policy on economic growth. He finds the literature on the topic demonstrates long-term economic growth is to a significant degree a function of tax policy. If governments seek to spur investment, he writes, they should lower taxes on the earnings of capital. If they seek to increase employment, they should lower taxes on workers and the businesses which hire them. The report also includes a discussion of the effects of progressive tax systems.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Charlie Katebi, Heartland’s government relations manager, at firstname.lastname@example.org or 312/377-4000.