Hidden Consequences: Lessons From Massachusetts for States Considering a Property Tax Cap

Publication Date: May 2008

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Phil Oliff; Iris J. Lav

Research Area: Banking and finance

Keywords: Economic inequality; Financial projections

Type: Brief

Coverage: Massachusetts

Abstract:

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.