Are Tax and Expenditure Limits (TELs) Effective in Constraining Government Budgets? A Meta-Analysis

Abstract

Tax and expenditure limits (TELs) are an important fiscal institution for policymakers to restrain government taxing and spending. However, traditional theories have proposed different hypotheses about the effectiveness of TELs, and empirical studies have not been able to reach a consistent conclusion. In this article, we employ a meta-analysis to synthesize existing empirical evidence and explore why different studies find different results on the effect of TELs on state and local budgets. Our meta-analysis results show that TELs are associated with small but significant decreases in both state and local revenue and expenditure. The findings from a subsequent meta-regression analysis add to the TEL literature by showing that the design features of TELs, types of revenue, and level of government can all contribute to the observed variations in the effect of TELs on state and local budgets. The conclusion of this study sheds light on the long-standing debate over the impact of TELs and suggests useful ways for policymakers to improve their TEL designs and policies.