Direct Democracy Paradox: State Fiscal Policies in the United States and the Threat of Direct Initiatives

Many studies have argued that the initiative process in U.S. state governments strengthened the proximity between the citizens' preferences and policy output. In contrast, this study hypothesizes that the direct initiative process weakens, rather than strengthens, the link between citizen preferences and state fiscal policy. Governments respond to the threat of initiatives but only those of conservative agendas. The results show that while the level and the progressivity of tax rates in the states without direct initiatives are influenced by citizen preferences, those in states with direct initiatives are more conservative than those without direct initiatives and the former are insulated from the influence of the citizen preferences.