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Restraining the Leviathan: property tax limitations in Massachusetts

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Author Info
David M. Cutler
Douglas W. Elmendorf
Richard Zeckhauser

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Abstract

We examine the effects of Proposition 2-1/2--a property tax limitation law approved by Massachusetts voters in 1980--and assess voter satisfaction with these effects. We find that the proposition had a smaller effect on local revenues and spending than expected, as a result of both amendments to the law and a strong economy. Voters in 1980 believed there was significant waste in local government, partly because of an inability to monitor local officials. Proposition 2-1/2 curbed these agency losses, but direct local override votes and municipal expenditure patterns imply that the proposition initially reduced spending more than voters wanted.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1997-47.

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Date of creation: 1997
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Handle: RePEc:fip:fedgfe:1997-47

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Keywords: Property tax ; Massachusetts;

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References listed on IDEAS
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  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416. [Downloadable!] (restricted)
  2. Poterba, James M, 1996. "Budget Institutions and Fiscal Policy in the U.S. States," American Economic Review, American Economic Association, vol. 86(2), pages 395-400, May. [Downloadable!] (restricted)
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  3. Rubinfeld, Daniel L, 1977. "Voting in a Local School Election: A Micro Analysis," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 30-42, February. [Downloadable!] (restricted)
  4. Henning Bohn & Robert P. Inman, . "Constitutional Limitations and Public Deficits: Evidence from the U.S. States," University of California at Santa Barbara, Economics Working Paper Series 18-95, Department of Economics, UC Santa Barbara.
  5. Ronald J. Shadbegian, 1996. "Do Tax And Expenditure Limitations Affect The Size And Growth Of State Government?," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 22-35, 01. [Downloadable!] (restricted)
  6. David M. Cutler & Douglas W. Elmendorf & Richard J. Zeckhauser, 1993. "Demographic Characteristics and the Public Bundle," NBER Working Papers 4283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. James M. Poterba, 1996. "Demographic Structure and the Political Economy of Public Education," NBER Working Papers 5677, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October. [Downloadable!] (restricted)
  9. Rothstein, Paul, 1994. "Learning the preferences of governments and voters from proposed spending and aggregated votes," Journal of Public Economics, Elsevier, vol. 54(3), pages 361-389, July. [Downloadable!] (restricted)
  10. Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August. [Downloadable!] (restricted)
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  11. James M. Poterba, 1997. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Lang, Kevin & Jian, Tianlun, 2004. "Property taxes and property values: evidence from Proposition," Journal of Urban Economics, Elsevier, vol. 55(3), pages 439-457, May. [Downloadable!] (restricted)
  13. Romer, Thomas & Rosenthal, Howard & Munley, Vincent G., 1992. "Economic incentives and political institutions: Spending and voting in school budget referenda," Journal of Public Economics, Elsevier, vol. 49(1), pages 1-33, October. [Downloadable!] (restricted)
  14. Matsusaka, John G, 1995. "Fiscal Effects of the Voter Initiative: Evidence from the Last 30 Years," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 587-623, June. [Downloadable!] (restricted)
  15. Poterba, James M., 1995. "Capital budgets, borrowing rules, and state capital spending," Journal of Public Economics, Elsevier, vol. 56(2), pages 165-187, February. [Downloadable!] (restricted)
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  1. Thomas A. Downes, 2002. "Do state governments matter?: a review of the evidence on the impact on educational outcomes of the changing role of the states in the financing of public education," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun, pages 143-180. [Downloadable!]
  2. Makowsky, Michael & Thomas, Stratmann, 2008. "More Tickets, Fewer Accidents: How Cash-Strapped Towns Make for Safer Roads," MPRA Paper 14360, University Library of Munich, Germany. [Downloadable!]
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  3. Nada Wasi & Michelle J. White, 2005. "Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13," NBER Working Papers 11108, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Katharine L. Bradbury & Karl E. Case & Chirstopher J. Mayer, 1998. "School quality and Massachusetts enrollment shifts in the context of tax limitations," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-20. [Downloadable!]
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