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The Effect of Supermajority Vote Requirements for Tax Increase in California: A Synthetic Control Method Approach

October 28, 2014
By Soomi Lee

This paper uses state-level panel data from 33 states over 49 years to determine the effects of supermajority vote requirements (SMVRs) on individuals’ tax burdens, and predict the effects of a new SMVR in California.

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This paper, written by University of La Verne associate professor of public and health administration Soomi Lee, uses state-level panel data from 33 states over 49 years to determine the effects of supermajority vote requirements (SMVRs) on individuals’ tax burdens, and predict the effects of a new SMVR in California.

SMVRs are politically popular measures designed to reduce tax burdens, Lee writes.

SMVR is a politically popular but contentious measure that 16 states have adopted and many other states have attempted to adopt,” Lee wrote. “The rationale behind the rule is to contain the growth of government by making it costly to form a winning coalition to raise taxes. Nonetheless, the current empirical literature is mixed at best and suffers from causal inference. … The results show that, from 1979 to 2008, 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.”

Taxes in California are lower because of the newly created SMVR, but the effect diminishes over time, Lee writes.

“My finding shows that, since the adoption of SMVR through 2008, Californians have paid $1.44 less nonproperty taxes per $100 personal income than what they would have without SMVR,” Lee wrote. “The magnitude of the effect was not trivial; $1.44 was equivalent to about 21% of the total tax state burden. Nevertheless, the effect was time varying. The adoption of SMVR had an immediate effect in reducing the tax burden, but the effect faded in the long run. This time-varying effect of SMVR helps explain why current empirical literature is mixed depending on sample time periods. It is also consistent with the line of literature that shows that the effect of state budgetary restrictions (e.g., TEL and property tax limits) typically washes out over time.”