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The Trouble with Tax Increase Limitations

33 Pages Posted: 19 Mar 2013  

David Gamage

Indiana University Maurer School of Law

Darien Shanske

University of California, Davis - School of Law

Date Written: March 18, 2013

Abstract

In this symposium essay, we explore the theoretical implications of one particular type of fiscal limitation on state legislatures — namely, special Tax Increase Limitation rules (TILs). We argue that there is no meaningful content to the term “tax increase” as used in TILs. This incoherence allows legislative majorities who wish to do so to circumvent TILs. This fact about TILs, among others, explains the observed inefficacy of TILs in shrinking the size of state governments.

Furthermore, TILs are not just harmless political theater. When combined with other common features of state fiscal constitutions, particularly Balanced Budget Requirements (BBRs), they tend to amplify revenue volatility. Revenue volatility is far from an imagined horrible, but is currently creating severe challenges for state revenue systems. Moreover, TILs potentially undermine jurisdictional competition, which is a relatively more effective means for controlling the size of government.

Keywords: tax increase limitations, tax expenditure limitations, balanced budget rules, tax expenditures

Suggested Citation

Gamage, David and Shanske, Darien, The Trouble with Tax Increase Limitations (March 18, 2013). 6 Albany Government Law Review 50 (2012). Available at SSRN: https://ssrn.com/abstract=2235401

David Gamage

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

HOME PAGE: http://www.law.indiana.edu/about/people/bio.php?name=gamage-david

Darien Shanske (Contact Author)

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

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