CHICAGO — A measure that would require a legislative supermajority to increase taxes could negatively affect Michigan’s bond rating, an analysis by an independent research group warns.
The Nov. 6 referendum would impose a two-thirds majority vote requirement to raise taxes. The requirement would reduce the state’s financial flexibility as it begins to emerge from a decade-long recession, the Citizens Research Council of Michigan said in a comment on the referendum.
“I think the bond community wants to know that governments will have the ability to adapt to changing economic times,” said Eric Loupher, the CRC’s director of local affairs. “Some of that might be expenditure reduction, but some of it might be revenue enhancement. If you’re taking that off the table, that makes the state less able to cope with its changing needs.”
If approved, the measure could “reduce the confidence of the rating agencies that the state will have the ability to apply timely responses to deteriorating financial circumstances,” the memo says.
The referendum is one of six controversial ballot questions that, if approved, would bring significant changes to Michigan’s legislative and fiscal policies.
Gov. Rick Snyder has urged voters to reject the supermajority referendum. In a recent blog post, Snyder said that his successful push last year to eliminate the unpopular Michigan Business Tax would have failed if the two-thirds majority requirement were in place.
There are currently 17 states that require some kind of supermajority to pass tax increases, and nine have constitutional requirements, which are the most restrictive, the CRC says. If the proposal passes, Michigan would be the tenth state.
The group’s analysis showed that whether a state has a supermajority requirement does not have much impact on tax collections. That’s because lawmakers, when faced with a restriction on raising taxes, often raise fees or cut spending on local governments, universities and other traditional recipients of state aid.
“When you look at total revenues for states that do [have the two-thirds requirement] and those that don’t, it’s hard to recognize any difference,” Lougher said. “Most of the differences look to be because of the economy.”
The six referendums make it Michigan’s most crowded ballot since 1978, according to Lougher.
“Back then we were going through an anti-tax movement,” he said. “Now I think it’s a result of having so much partisanship in the Legislature that people don’t feel they can get a fair shake with legislative means, so they’re reverting to the ballot instead.”
Voters will also weigh in on whether to overturn the state’s emergency management law dealing with fiscally challenged local governments. Other proposals include one to make collective bargaining rights part of the constitution; requiring a vote on the construction of international bridges; a measure to provide limited collective bargaining rights to home health care workers; and one that would require electric utilities to provide at least 25% of electricity sales from renewable sources.
In related news, City Council members from Pontiac, Flint and Benton Harbor— all under state-mandated emergency management — sued the state last week to force their emergency managers out of office. The move comes a month after the state suspended the EM law, Public Act 4, as required until after the election. The suspension means the current emergency managers have no legal structure, the suit says.
