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

Abstract

My paper examines whether supermajority vote requirements (SMVR) to raise taxes (SMVR) in California’s constitutions suppresses state tax burdens in California. SMVR is a politically popular but contentious measure that 16 states adopted and many other states have attempted to adopt. 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. I take a different approach from extant literature and estimate the causal effect of SMVR on tax burdens in California by using synthetic control methods. The results show that, from 1979 to 2008, SMVR reduced the state non-property tax burden by an average of $1.44 per $100 personal income, which is equivalent 21% of the total tax burden each year. The effect of SMVR was immediate after the adoption of SMVR, but it has abated over time.

Keywords: supermajority, California, budget process, state budget, budget institution, synthetic control method, proposition 13, tax limitation, TEL, tax and expenditure limitation