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|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|10837||2000||27 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Public Economics, Volume 76, Issue 1, April 2000, Pages 41–67
This paper measures the effect of state-level supermajority requirements for tax increases on tax rates. Unobserved attitudes towards taxation tend to influence both the adoption of supermajority requirements and tax policy. Consequently, one cannot distinguish between the effect of these requirements and their correlation with these unobserved attitudes. A model is presented in which legislatures controlled by a pro-tax party adopt a supermajority requirement to reduce the majority party agenda control. The propensity of pro-tax states to adopt supermajority requirements results in an underestimate of the true effect of these requirements on taxes. To correct this identification problem, the paper first uses fixed effects to control for unobserved attitudes and then employs instruments that measure the difficulty of amending state constitutions. The paper concludes that supermajority requirements have significantly reduced taxes.
In each of the years between 1996 and 1999, the US Congress voted on a proposed constitutional amendment to require a two-thirds supermajority legislative vote in order to increase taxes through a new tax, rate increase, or expansion of the base. Each time, the proposed requirement fell short of the two-thirds vote necessary to initiate a constitutional amendment. Thirteen states already have similar supermajority requirements in place, and 16 states have recently introduced legislation to enact such requirements (Americans for Tax Reform, 1996).1 This paper empirically measures the effect of supermajority requirements on taxes, using cross-state variation in supermajority requirements between the years 1963–1995. At first glance, supermajority requirements appear to have had no effect on taxes. Among the continental 48 states, supermajority states and non-supermajority states had identical average effective tax rates of 7.13% in 1995. If these requirements were randomly assigned to states, one could conclude that supermajority requirements do not reduce taxes. However, states choose to adopt these requirements and may do so for strategic reasons related to tax policy.2 This paper argues that underlying state characteristics influence both supermajority requirements and tax policy. Some of these state characteristics, such as income, can be controlled for directly by comparing average tax rates conditional on observable characteristics in a multiple regression framework. Other characteristics, such as citizens’ attitudes towards taxation and public services, are unobservable. Consequently, using sample means alone, even conditional on observable characteristics, one cannot distinguish between the effects of supermajority requirements on taxes and the propensity of states with certain attitudes towards taxation to adopt these requirements. To provide a framework for correcting this identification problem, a theoretical model explores both the adoption of supermajority requirements and the effect of these requirements on tax policy. The model predicts that, in legislatures controlled by the pro-tax party, the median legislator and members of the minority anti-tax party will form a coalition to enact a supermajority constitutional amendment. The median legislator, a member of the majority pro-tax party, is willing to give up his role as the pivotal voter in order to reduce the agenda-setting power of extremists within the pro-tax party. The model illustrates the identification problem described above: states with pro-tax legislatures tend to adopt supermajority requirements. This theoretical prediction is supported anecdotally as Democrat-controlled state legislatures are more likely to adopt supermajority requirements. Consequently, a comparison of sample means, even conditional on observable state characteristics, may tend to understate the effects of supermajority requirements on tax rates. Empirically, this paper makes two attempts to correct for this identification problem. First, the econometric model includes state and year fixed effects to better control for unobserved attitudes towards taxation. Second, as motivated by the theoretical model, the paper uses variation in state constitutional amendment rules as instruments for supermajority requirements in a two-stage least-squares framework. To preview the empirical results, the paper finds a small, statistically insignificant, negative effect of supermajority requirements on taxes when using ordinary least-squares. After correcting for the identification problem due to the correlation between supermajority rules and unobserved attitudes towards taxation, the paper finds a large, statistically significant, negative effect in both the fixed-effects and instrumental variables estimation results. In the uncorrected estimates, the propensity of pro-tax states to adopt supermajority requirements disguises the effects of these rules on tax policy. 2. State supermajority requirements The tax revolt of the 1970s restricted the power of state and local governments to tax and spend. Although these limits vary widely across states, they can be placed into three broad categories: traditional tax and expenditure limitations, voter approval requirements, and supermajority requirements. Traditional tax and expenditure limitations (in 26 states) limit tax or expenditure growth to the growth rates of personal income, population or inflation. Voter approval requirements (in four states) oblige the legislature to request voter approval in a referendum for all tax increases and new taxes. Supermajority requirements (in 13 states), summarized in Table 1, require a three-fifths, two-thirds, or three-quarters legislative vote in order to approve tax increases or new taxes.3 Among the 13 states adopting supermajority requirements, the Democrats controlled at least one chamber of the legislature in ten states and held the governor’s office in 11 states at the time of adoption. Three southern state legislatures, Florida, Louisiana, and Mississippi, passed their supermajority requirements following the Voting Rights Act of 1965, presumably to protect the status quo tax rates in the face of predictable changes in the electorate.Consider the experience of three states, Nevada, Oregon and Ohio, that have all recently considered adoption of supermajority requirements. In 1996, a former Assemblyman used Nevada’s direct legislation provision to place a two-thirds supermajority requirement amendment on the ballot after failing to get legislative approval of his idea in 1993; voters subsequently approved the amendment (Whaley, 1997). Also in 1996, the Oregon legislature initiated a supermajority requirement by a narrow majority.4 The vote was sufficient to initiate the supermajority requirement given that Oregon, unlike many other states, requires only a simple legislative majority to initiate a constitutional amendment. Voters approved the amendment by a vote of 75 to 25% (The Bulletin, 1996). In Ohio, voters in 1983 rejected a voter-initiated three-fifths supermajority requirement amendment by a vote of 60% against to 40% in favor after beneficiaries of government programs sponsored a negative publicity campaign (Leonard, 1983). In 1995, the Ohio House passed a three-fifths supermajority requirement by a vote of 62 to 37, requiring bipartisan support to exceed the three-fifths vote needed to initiate a constitutional amendment (Suddes, 1995). Leaders in the Senate never brought the requirement to a vote, claiming that the supermajority requirement would damage the state’s AAA bond rating (Davey, 1995). While Republicans controlled the legislatures of both Oregon and Ohio, Democrats controlled the legislature in the other five states with legislatively initiated supermajority requirements. Taken together, the experiences of these three states suggest that both voters and legislatures are instrumental in the adoption of supermajority requirements and that the rules of amending state constitutions are important determinants of adoption.
نتیجه گیری انگلیسی
The results of this paper support the hypothesis that supermajority requirements are effective in reducing taxes at the state level. The paper has presented a theoretical framework for understanding both the effects of legislative supermajorities upon fiscal outcomes and reasons why states may adopt supermajority requirements. In the model, the median legislator, a member of the majority party, forms a coalition with the minority party to enact supermajority requirements in order to reduce the power of the majority party agenda setter. The model illustrates the endogeneity of supermajority requirements as pro-tax states adopt such requirements, a hypothesis that is supported empirically as Democrat-controlled legislatures are found more likely to adopt supermajority requirements. The model also provides a framework for selecting instrumental variables. The empirical results suggest that supermajority requirements have powerful effects. Using standard OLS estimation the paper finds small, statistically insignificant effects. In the endogeneity-corrected estimates, these requirements are found to decrease the tax rate relative to the sample average in a statistically significant manner, by 8% in fixed-effects estimation and 50% in instrumental variables estimation, although adjustments to the instrumental variables model shrink the range to between 8 and 23%. These results are stronger than those found in previous work. While the results match Crain and Miller (1990) in sign, they are not directly comparable because that paper uses growth rates in spending while this paper uses levels of taxes. Temple (1997) finds statistically insignificant effects. As motivated in the theoretical model, this paper focuses on political control variables while Temple focuses on demographic variables. Also, most states adopted their supermajority requirement during the 1970s and 1990s, but not the 1980s, suggesting a non-linear trend in unobserved attitudes towards taxation. Thus, Temple’s use of a linear time trend in unobservables may not completely correct for the endogeneity of supermajority requirements. Rueben (1995) finds that tax and expenditure limitations have no effect using an OLS or fixed-effects model but stronger effects using direct legislation as an instrumental variable. She finds that a binding state limit reduces general fund revenues as a percent of personal income by 2 percentage points. Here, supermajority requirements are found to reduce tax revenues as a percent of personal income by 3.6 percentage points in the baseline specification and up to 1.7 percentage points in the alternative specifications. The federal government and sixteen states are now considering adopting supermajority requirements. The shift in attention by tax reformers to supermajority requirements is consistent with the results of this paper: constitutional supermajority requirements have powerful effects in reducing taxation.