Anderson Economic Group Work

Analysis of Proposal 5: “2/3” ballot proposal and Michigan’s tax limitations

The “2/3” proposal (Proposal 12-5) on the November 2012 statewide ballot is a proposed constitutional amendment that appears on the ballot as a result of an initiative petition sponsored by the Michigan Alliance for Prosperity.  If approved by the voters, Proposal 12-5 will add a new legislative supermajority vote requirement (two-thirds vote in each chamber of the Michigan legislature) to the 1963 Michigan Constitution for state government to enact new taxes or to increase the rates or bases of existing taxes.  The Constitution currently contains a number of state tax limits that apply to specific taxes; however, this proposal would apply more broadly to all state taxes.  Proposal 12-5 would add to Michigan’s rich history of constitutional tax limits, dating back 100 years.

The National Federation of Independent Business retained Anderson Economic Group (AEG) to research and analyze Proposal 12-5 with a keen eye towards how the proposal would interact with existing state tax limitations, including 1978’s Headlee Amendment and Proposal A of 1994.  This report finds that while Proposal 12-5 adds a new state tax limitation to a host of existing limits, it does not conflict with them in any way.  In fact, the proposed constitutional language includes a provision expressly stating that the new section shall not “… be construed to limit or modify tax limitations otherwise created in this constitution.”  Where current constitutional provisions are more specific or impose a stricter limitation, these existing limitations would not be superseded by the proposed language.  The report also dispels some common misunderstandings associated with the proposal, including that it applies to local taxes (it does not), that it would prohibit state tax increases (it does not), and that it would allow the legislature to enact laws without the governor’s signature (it does not).

The full report is available here.