Hidden Consequences: Lessons From Massachusetts for States Considering a Property Tax Cap
Publication Date: May 2008
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Economic inequality; Financial projections
In 1980 Massachusetts voters approved Proposition 2 ½, which mandates that property tax revenues not exceed 2.5 percent of a community’s assessed value and that a community’s property tax revenue not grow by more than 2.5 percent a year. Because Proposition 2 ½ lowered property taxation in Massachusetts, advocates of limited taxation often cite it as a model for reform. Local "overspending" that proponents claimed Proposition 2 ½ could curb did not exist in the imagined quantities, and necessary public services have been jeopardized. By limiting Massachusetts localities' only major source of revenue, Proposition 2 ½ has exacted a considerable cost — one that highlights the shortcomings of property tax revenue caps as a policy approach.