Proposition 2½ Still Delivers
A New Analysis of Massachusetts' Levy Limit
Massachusetts voters approved Proposition 2½ in 1980, two years after California’s Proposition 13. Both ballot initiatives were citizen-led reactions to skyrocketing property tax burdens, and both have succeeded in keeping property tax burdens in check, but the way they go about it is radically different. California’s regime has distorted markets and shifted tax burdens for decades, while Proposition 2½ pioneered a far better, more economically efficient approach: the levy limit.
Forty-six years after voters approved Proposition 2½, the measure is still delivering for Bay Staters. That’s the subject of my latest paper, published with the Fiscal Alliance Foundation, measuring the impact of Massachusetts’ levy limits over the past two decades.
Proposition 2½ actually combines a rate limit and a levy limit. Today, the levy limit is what matters, but in the early days, both were significant. In 1982, just as the initiative was taking effect, Massachusetts’ effective property tax rate was 3.64%, and the rate on residential property was even higher, at 3.72%. That is not a typo and it is not a mistake—well, a policy mistake, certainly, but not a statistical error. Today, the average statewide effective rate across all property classes is 1.19% and effective rates on residential property have declined to 1.04%, which, though still higher than the national average, is undeniably a marked improvement.
My new paper explains how Proposition 2½ works, describes how it differs from a strict levy limit (on this, see also my previous SALT Road post on different types of levy limits), and documents taxpayers’ savings under the measure. The chart below shows actual tax levies for ten jurisdictions (plus a statewide average) on the median-value home, along with what the tax burden would be without Proposition 2½ and what it would be under a strict 2.5% levy limit.
As I conclude in the paper, Proposition 2½ has provided Massachusetts homeowners with decades of meaningful relief. Itis not the aggressive restraint on cities and towns that opponents claim it to be; even with its protections, Massachusetts’ property tax burdens remain well above national averages. But it is what stands between homeowners and much higher property taxes.
You can read the full analysis here, on the Fiscal Alliance Foundation’s website.
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