Restraining the Leviathan: Property Tax Limitation in Massachusetts

53 Pages Posted: 12 Jul 2000

See all articles by David M. Cutler

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Douglas W. Elmendorf

Harvard Kennedy School

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1997

Abstract

Proposition 2.5, a ballot initiative approved by Massachusetts voters in 1980 sharply reduced local property taxes and restricted their future growth. We examine the effects of Proposition 2.5 on municipal finances and assess voter satisfaction with these effects. We find that Proposition 2.5 had a smaller impact on local revenues and spending than expected; amendments to the law and a strong economy combined to boost both property tax revenue and state aid above forecasted amounts. Proposition 2.5 did reduce local revenues substantially during the recession of the early 1990s. There were two reasons for voter discontent with the pre-Proposition 2.5 financing system: agency losses from inability to monitor government were perceived to be high, and individuals viewed government as inefficient because their own tax burden was high. Through override votes, voters approved substantial amounts of taxes above the limits imposed by the Proposition.

Suggested Citation

Cutler, David M. and Elmendorf, Douglas W. and Zeckhauser, Richard J., Restraining the Leviathan: Property Tax Limitation in Massachusetts (September 1997). NBER Working Paper No. w6196. Available at SSRN: https://ssrn.com/abstract=225954

David M. Cutler (Contact Author)

Harvard University - Department of Economics ( email )

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Douglas W. Elmendorf

Harvard Kennedy School ( email )

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United States

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
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National Bureau of Economic Research (NBER) ( email )

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