Testimony before Maryland Legislature on Tax Increase Supermajority Requirements

March 5, 2009

Testimony of Joseph Henchman

Tax Counsel and Director of State Projects, Tax Foundation

Committee on Ways and Means

March 5, 2009

Regarding H.B. 684

My name is Joseph Henchman, and I am currently Tax Counsel and Director of State Projects at the Tax Foundation. We are a non-partisan, non-profit research institution founded in 1937 to analyze tax issues and raise economic awareness among taxpayers, lawmakers, and the media. We track tax-related issues at all levels of government, and follow tax policy and tax legal issues at the federal and state levels closely.

I appreciate the invitation to submit this testimony regarding H.B. 684 to the Ways and Means Committee. The Tax Foundation takes no position on the bill, but is eager to provide information about the subject matter. In my remarks, I will try to do three things. First, I hope to provide a comparative picture of tax increase supermajority requirements in other states. Second, I want to evaluate arguments made against tax increase supermajority requirements as best I can. Third, I will review how a tax increase supermajority requirement comports with principles of sound tax policy.

State legislation is often described as an expression of majority rule. However, the legislative process contains steps that seem designed to hinder spontaneous expressions of majority sentiment. The members of the committee need no reminder that to even come up for a vote, a bill needs to demonstrate a likelihood of success and some measure of approval from legislative leaders. Passage must be agreed to by two separate popularly elected houses. The Governor, himself popularly elected, must sign the bill. Simply put, the normal legislative process has an implicit goal of ensuring final products are subjected to extensive consideration over a period of time by several actors, and has incorporated elements that further that goal.

In many states, to become law, tax increases must constitutionally survive one additional hurdle beyond the hurdles other legislation must survive. These hurdles can include voter approval, multiple readings, and committee origin requirements (as in the federal government). In sixteen states, the hurdle rises to a higher threshold of legislative approval.

Requiring a higher threshold for taxes has historically been justified on similar grounds as for other subject matters subject to supermajority requirements. Impeachments and removals from office, constitutional amendments, and ending filibusters are all common examples of matters considered so important that a simple majority vote would not deliver the sought-after public consensus and thorough consideration.

The sixteen states that have such a rule for tax increases are as follows:


Year of Adoption

Required Vote








Only applicable to taxes existing in 1934







Also subject to voter approval







Corporate income tax only, if increase exceeds 5% limit




Taxes and fees, in odd-numbered years only













Only if Governor declares emergency; otherwise requires voter approval










South Dakota






Tax increases over spending limit also require voter approval

Supermajority requirements for tax increases are common and long-standing in the states. It would be silly to say that these requirements are unusual or have destroyed the states where they exist. It is true that they diffuse the will of a bare majority, but so do many other steps in the lawmaking process.

Opponents of tax increase supermajority requirements make three basic arguments. First, they say that such requirements are unnecessary given Americans’ aversion to taxes. Because of this aversion, they say, tax increases are already scrutinized and rare. But as Marylanders know, tax increases are not so scrutinized and rare as this argument suggests. Once they have momentum toward passage, tax bills often become a magnet for any number of special interest provisions that increase the complexity and reduce the neutrality of the tax code. Increasingly states are shifting tax burdens to unpopular political minorities, as Maryland did in 2008 with smokers and high-income earners. With only a simple majority needed, there is little need to slow down and consider concerns shared by, or imposed on, a minority.

Second, opponents say that supermajority requirements empower a minority, which in turn can become obstructionist and demand unrelated favors in return for votes. I will concede that a supermajority requirement empowers a minority; indeed, that is its purpose. This in of itself is not a bad thing; much of our constitutional structure and the rules of parliamentary procedure are designed to protect the rights of a minority against an otherwise steamroller majority. Logrolling, of course, can present a problem for legislatures no matter the vote threshold. In California, recently, legislators had to concede the creation of a harmful special interest tax provision and schedule an unpopular initiative for the ballot in return for the final two votes it needed to pass the budget. However, prior to those final deals, the budget bill was greatly improved because of the need to reach a two-thirds threshold. One side wanted tax increases and the other side wanted spending cuts, and the final result was a compromise of the two, as intended. For a state like California, it must be said, there is a real danger that without the two-thirds rule, California would essentially be a one-party state in the Legislature, greatly curtailing the thoughtful consideration of legislation. The supermajority requirement helps that survive.

Third, opponents say that many supermajority requirements have led to legal uncertainty, primarily because many cover taxes but not fees. A legal scholarship must then be developed, distinguishing taxes from fees, and this is not always easy. I have two responses. First, some states cover both taxes and fees, which eliminates this uncertainty. Second, such a legal scholarship exists and has come to a remarkable consensus. The Tax Foundation tracks dozens of cases and laws in dozens of states, many of which have developed cogent definitions of what taxes are and when they differ from fees. Maryland, if it adopted this bill, could rely on these precedents quite easily.

Finally, I would urge that the members and other legislators consider the principles of sound tax policy when evaluating tax legislation. Originally developed by Adam Smith, these principles guide Tax Foundation analysis and are the subject of surprising consensus between left and right. The key principles are four. First, is simplicity-is the tax code easy to understand for those who must comply with it? Second, is transparency-is the method of changing the tax code visible and open? Third, is stability-are taxpayer obligations and state revenues unlikely to change dramatically from year to year? Fourth, is neutrality-does the tax code focus on raising revenue for the programs society wants to fund, without picking winners or losers or trying to influence behavior one way or the other?

The bill under consideration impacts at least two of these principles: transparency and stability. Requiring additional consideration and empowering a minority when considering tax issues means a greater likelihood that the resulting bill will be the product of consensus and thoughtful consideration. The additional consideration also sends the signal that tax increases will not happen suddenly, and the additional legislative give-and-take reduces the chance that a minority will alone bear the burden of higher taxes. This increased stability in turn furthers the certainty required for investment, capital formation, and job creation.

Once again, I would like to express my appreciation for being invited to submit this testimony today. My contact information is included with my written testimony if any member would like to contact me on this or any other issue. I would also be happy to take any questions you may have at this time.

Yours Very Truly,

Joseph D. Henchman
Tax Counsel & Director of State Projects
Tax Foundation



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