What Are The Fiscal Implications Of The Initiative Process?

When the budgetary numbers were compared far states that allow voter initiatives (from 1960 to 1990) and states that do not, several clear patterns emerged: Initiatives led to significantly lower spending and taxes. Per capita spending, for example, was about $83 per capita lower in a typical initiative state than a typical non-Initiative state, which translates into $332 less expenditure (and hence taxes and fees) for a family of four.) Compared to the average level of state and local spending, $2300 per capita, initiatives caused a reduction of 4 percent.

Initiatives led states to decentralize spending decisions.  Local spending was 10 persent higher in initiative states than non-initiative states, while state spending was 12 percent lower.  Thus, voters used initiatives to force spending decisions to be made closer to home.

Initiatives led states to adopt a less redistributional revenue system. In Initiative states, broad-based taxes (primarily on property, Income, and sales) were 8 percent lower than in non-Initiative states, while fees for services (such as college tuition) were 7 percent higher. Initiative states charged users for services they received instead passing the costs on to other taxpayes.

The period from 1960 to 1990 covers the high point of the big government era and the rise of the taxpayer rebellion. The evidence analyzed provides the first broad statistical overview of the consequences of voter initiatives for tax and spending policies. Taken together, the findings show that voter initiatives are not the most important factor determining state fiscal policies, but they do make a difference. Voters have used the initiative to cut back the size of the state governments and put a break on redistribution.