As Fiscal Year 2002 begins on July 1, 2001, the Proposition
2½ property tax levy limit is twenty years old.
Prop 2½ was passed by the voters in November 1980. It cut
the auto excise rate by almost two-thirds, repealed two major state mandates and forbade future unfunded state mandates;
these provisions took effect shortly after the vote. The property tax cut and/or levy limit went into effect the
following July 1st, the beginning of all communities' fiscal year 1982.
Despite opponents' prophecies and claims of disaster, devastation and doom, Prop 2½ successfully
resisted efforts to repeal it, and cut or limited Massachusetts property taxes
in every community in the Commonwealth. Twenty years later, property tax rates still cannot be more than 2.5 percent of
fair market value (except temporarily for a debt exclusion), and each community's property tax levy cannot increase
more than 2½ percent a year (except for "new growth," or unless there is a voter-approved override).
Many of those long-ago opponents have become supporters.
Some are still complaining, but it seems clear that Prop 2½ is now an accepted part of the municipal landscape.
Citizens for Limited Taxation - which put Prop 2½ on the
1980 ballot - asked its research arm, the Citizens Economic Research Foundation (CERF), to determine what the 20-year
impact has been. CERF commissioned a report from Gloucester-based Lane & Company, which provides a municipal
database used by the municipal bond market.
Highlights of the report, which adjusts for both population
change and inflation, show the impact of the Prop 2½ levy limit in constant per capita dollars from FY '82 through FY
2000:
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Local appropriations are 42.2 percent higher than would be
accounted for by inflation alone. Local receipts include auto excise revenues, fees, and non-enterprise water and sewer
charges: they have increased 76 percent. State aid has increased 45.2 percent.
Conclusion: Prop 2½ cut and/or limited the growth in property taxes; it actually kept per capita residential
property tax increases under inflation while limiting the increases in commercial/industrial property taxes
that were inevitable with classification. Local spending, however, continued to grow faster than inflation.
And it is important to note that the education establishment certainly did its share
of that spending growth!
CLT's goal, to cut and limit the regressive property tax,
was realized. The auto excise rate was cut, though revenues increased with motor vehicle prices over the years. Water and
sewer charges and appropriations were removed from the property tax in many communities as enterprise funds were created.
Other major effects were to change the relationship between
local government and the state by encouraging more local aid and discouraging state mandates; and between local voters and
local government by requiring voter overrides for taxes above the base levy limit.
Property taxes are still too high in Massachusetts but not
as high as they were and certainly not as high as they were heading before the passage and implementation of the initiative
petition known as Proposition 2½.
