What does a “yes” vote on Proposal 5 mean?
It would mandate a supermajority tax voting requirement within the Michigan legislature, otherwise known as STVR. Specifically, two-thirds of the House and Senate would both need to vote in favor of either lifting the tax rate or expanding the tax base. Michigan already has a similar requirement for the state education property tax. The amendment also allows for tax hike proposals to be placed before voters on a November ballot, but only a simple majority is required to approve tax hikes under those circumstances.
What does a “no” vote on Proposal 5 mean?
A “no” vote rejects the proposal and the status quo is retained. That is, the legislature may vote to raise taxes with a simple majority in the Michigan House and Senate.
Are there economic consequences to adopting such a proposal?
Yes. The academic literature is mixed — as such research frequently is — but on balance it appears to show that a) STVRs restrain taxation; b) spending; and thus c) encourage economic growth. A 2000 study by Brian Knight of Brown University estimated that STVR states have tax burdens some 8 percent to 23 percent less than states without them. A 2007 Rockefeller Institute study showed that states that adopt the strictest tax and expenditure limitations may see spending declines between $139 and $207 per capita. A tax and expenditure limitation, or TEL, is a broader form of a STVR; however, it is similar enough that analyses of TELs are included in the Mackinac Center’s new Policy Brief on Proposal 5. Another paper on TELs indicates that they facilitate economic growth. A 2006 paper published in the Marquette Law Review indicates that TELs are linked to “1.93 percent higher growth rate in per capita income” than states without such limitations.
Does a STVR limit the ability of government to obtain revenue?
Absolutely – that is the whole point of making it harder to raise taxes. It is far from impossible; however, the government must achieve a broader approval rate for doing so. That is, with a two-thirds vote of the legislature or a majority vote of the people.
It is worth noting, too, that the word “need” can be subjective. The Mackinac Center for Public Policy has argued that there remains plenty of room to save needed dollars for courts or transportation infrastructure, for instance, with reasonable reforms of state government. Indeed, the Center has shown more than $5 billion in savings can be found by simply benchmarking government fringe benefit packages to private-sector averages.
Aren’t other states in fiscal straits because they have adopted STVR?
No. On balance there is little connection between STVRs and the fiscal problems of states like California, Nevada and Mississippi. These states have been mentioned in press accounts surrounding the Proposal 5 debate. People have specifically argued that spending mandates combined with an STVR have caused California’s problems. But the state’s own Legislative Analyst’s Office reports that “Despite these restrictions, the legislature maintains considerable control over the state budget — particularly over the longer term.”
Nevada has the highest unemployment rate in the nation, but that has not always been the case. Indeed, after it adopted STVR in 1996, the state enjoyed an unemployment rate below the national average along with explosive population growth from 2000 to 2010. This is not to imply causation, but it does refute the assertion that STVRs are causing Nevada’s current employment troubles.
Mississippi has also been held up as a reason not to support Proposal 2. The argument presented is that Mississippi is the poorest state in the union, therefore STVR are ineffective. But Mississippi has a long history of poverty. In fact, it was ranked the poorest state in America in 1936, almost four decades before it adopted a STVR. Again, the links being drawn are spurious ones.
Would passage of Proposal 5 affect the Headlee Amendment in any way?
No. The ballot language very clearly indicates that the Headlee Amendment’s provisions would not be impacted by passage of Proposal 5.