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

Abstract

AbstractMy article examines whether supermajority vote requirements (SMVR) to raise taxes in California's constitution suppresses state tax burdens. SMVR is a politically popular but contentious measure that 16 states have 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 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.