The Local Response to Tax Limitation Measures: Do Local Governments Manipulate Voters to Increase Revenues?
This paper provides evidence that some cities subject to a statewide tax limit manipulate their mix of productive and administrative services in an attempt to get voters to override the statewide limit. When a statewide limit reduces a city's budget, one manipulative response is to cut "service" inputs (for example, teachers or uniformed police officers) by a relatively large amount, while cutting administrative inputs by a relatively small amount. This approach reveals a relatively large trade-off between public and private goods, and the severe consequences from a tax limit may encourage local voters to override the statewide limit. We provide evidence that cities with local-override options tend to adopt this approach. Manipulation is most prevalent among cities run by city managers (as opposed to strong mayors). Copyright 2001 by the University of Chicago.
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