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Monday, February 8, 2010

HJR 1006: Two-Thirds Vote on New Taxes -- Fiscal Disaster to Follow

South Dakota's constitution already requires a two-thirds vote of the Legislature to pass any increase in our property, income, or sales taxes. We can increase those taxes by a simple majority on a ballot initiative... but circulating petitions and winning a statewide campaign is arguably harder than jawboning 70 legislators who pay more attention to fiscal realities (pundits, fire away on that hypothesis!).

HJR 1006 proposes to tighten the requirements for raising revenue for the state. Sponsored by GOP Reps. Kristi Noem and Val Rausch and Senator Bob Gray, the resolution would place on our November ballot a constitutional amendment that would raise the bar for new taxes by initiative to two-thirds supermajority. The amendment also expands the supermajority requirement for initiative and Legislature to any new tax or tax increase.

Think South Dakota's budget is a mess now? Just wait 'til you require a two-thirds supermajority to get any new revenue. This amendment would fully Californicate our budget (new state slogan: "brink of default").

This 2001 report on a similar amendment proposed at the federal level outlines several problems with supermajority tax requirements:
  1. Fixing deficits would come almost exclusively through cutting services rather than taking advantage of available sources of revenue.
  2. Special interests can easily win tax breaks and make it nearly impossible for the general public to repeal them.
  3. Loopholes and mistakes in the tax code become nearly impossible to fix.
  4. The rich get richer and the poor get poorer, since the wealthy benefit more from tax breaks and subsidies, while the middle and lower classes derive more utility from public services.
  5. Individual legislators have more leverage to dicker for special projects for their districts.
  6. Contrary to the claims of the Heritage Foundation, supermajority new tax requirements do not improve economic growth.
The Tax Foundation feels otherwise, saying supermajority requirements foster consensus and prevent sudden tax increases. I welcome you to read both sides and see what you think. But I'm inclined to believe that requiring a two-thirds majority to raise any revenue for the state budget means we'll wait to fix fiscal problems until we reach an absolute crisis... after all sorts of damage has already been done.

6 comments:

  1. I think this would be a good law. I suspect that Reps. Noem and Rausch, and Sen. Gray, want to protect the taxpayers of this state against what they (correctly, IMHO) see as an incoming tsunami of debt that could eventually culminate in the imposition of a state income tax on the people of South Dakota.

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  2. I agree with a one part of Cory's list. measures need to be made to prevent the type of vote-trading and outright political bribery from being written into legislation. This actually goes the wrong direction on this. But this problem is hardly new and HJR1006 doesn't change it significantly.
    The rest sounds great, reading more like targeted benefits to me:
    *legislative stability in the tax code. The importance of being able to create a business plan without worrying that the tax code is going to change cannot be stressed enough. The timing of the heath-scare debate was horrendous for this reason. I have no doubt jobs were 'lost or not created' because of it.

    *Rich get richer...so the benefits of productive work are rewarded to the worker rather than handed to the poor for no other reason than they need it? Need does not ever create a claim. Charity can only be given, never taken, or it is only justified theft. Besides, the idea that the rich get richer by not being burdened by government and the poor being able to find better jobs (created by wealthy rich people spending more money) sounds better than the government locking up funds for 5 years to build a park.

    *Hamstringing potential future stimulus packages would be very nice. FDR had one of the most significant upticks in 34 when the Supreme Court bashed his stupid programs into dust (temporarily)

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  3. But Stan, if there's a big load of debt coming, can we really cut our way out of it? Isn't there going to come some point where we have to pay the bills?

    Maybe we've got it backwards: instead of making it harder to get the money we need to pay the bills, what if we required a two-thirds supermajority to pass appropriations?

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  4. But Stan, if there's a big load of debt coming, can we really cut our way out of it?

    We can try. If we try and fail, then we should be able to muster the 2/3 supermajority that we would need to raise more revenue -- after exhaustive discussion and debate, no doubt.

    Instead of making it harder to get the money we need to pay the bills, what if we required a two-thirds supermajority to pass appropriations?

    How about doing both?

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  5. I'm just curious why it's the taxing side that draws the supermajority fire rather than the spending side. Does anyone impose a 2/3 rule on passing the budget?

    And really, if we're going to go down the supermajority road, why not 2/3 vote on everything? Why not just rule by consensus? Don't all issues of state warrant extensive debate and discussion? Declaring war, passing (or repealing) the death penalty, changing eminent domain rules, building a highway... how are those actions any less significant than appropriating money for state functions?

    My concern is the same as James Madison's: moving to supermajority rule is really moving toward minority rule.

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  6. My concern is the same as James Madison's: moving to supermajority rule is really moving toward minority rule.

    Great concept. Never heard or read that one before. Thank the Higher Powers for Scott Brown!

    ReplyDelete

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