The Impact of State Fiscal Preemption on Local Taxing Authorities: A Case of Michigan

Abstract

This study investigates the impact of state fiscal preemption on local governance structure. Specifically, it focuses on state-imposed tax and expenditure limits (TELs), which constrain local governments’ ability to raise property tax revenues. Using a unique data set on millage rates levied by all local governments in Michigan from 2011 to 2017, the study examines how the state-imposed limitation on local property taxable values affects local taxing efforts. The findings show that the assessment limit results in higher taxing power by cities and special districts. It also indicates local residents’ preferences to be drivers for the greater taxing efforts.