Tax And Expenditure Limitations Research Articles

School Finance Litigation, Tax and Expenditure Limitations, and Education Spending

Since the early 1970s, litigation in many U.S. states has led to education finance reform. Over the same period, many states have imposed new tax and expenditure limitations (TELs) on local governments. The imposition of a TEL may alter how local and state education expenditures change subsequent to court‐mandated decreases in spending inequality. Similarly, the effectiveness of TELs in limiting local education expenditures may be influenced by reform. To better evaluate the effects of reform and TELs on education spending, this article considers them jointly and finds that reform has a negative effect on local own‐source education expenditures only in the presence of TELs. In the absence of court‐ordered reform, TELs decrease own‐source expenditure, but the effect is less pronounced than when TELs are present with reform. When both are present, state government spending on education is higher. Also TELs and court‐ordered reform independently increase state government spending on education. (JEL H72, I22)

Do Tax and Expenditure Limits Lead to State Lotteries? Evidence from the United States: 1970-1992

The past three decades have seen the widespread introduction of both state-level and local-level tax and expenditure limits (TELs). Over the same time period, 37 states have legalized state lotteries to raise revenues. The authors assert that the combination of TELs and lotteries may be an optimal strategy for a median voter attempting to lower his or her tax burden while lowering the cost of monitoring the behavior of government officials. They find consistent evidence that the existence of a limit on the increase of property assessments is a positive predictor of the adoption of a lottery, and they also find some evidence that state limits and limits on property tax revenues also influence states to pass lotteries. Other local TELs have a little estimated impact on the lottery decision.

Constitutional Tax and Expenditure Limitation in Colorado: The Impact on Municipal Governments

Tax and expenditure limitations (TELs) have become a pervasive influence on local government fiscal affairs. Explanations for the spread of TELs suggest that voters thought local government was growing more than needed. Thus, TELs were intended to constrain growth and reduce the size of local governments. This article's purpose was to determine the impact of two separate kinds of TELs, one a property tax measure, and the other a comprehensive revenue and expenditure limit, upon the growth of municipal governments in Colorado. Using a panel data set on municipal budgets (1975–1996), the article demonstrates three major points: 1) the effectiveness of a TEL in achieving reductions in local government revenue and spending growth depends upon the nature of the TEL; 2) the comprehensive TEL did effectively constrain growth and reduce local government reliance on the property tax, despite the local options for exemption; and 3) TELs do not have uniform impacts among governments of different population.

Did the property tax revolt affect local government wages and employment? Evidence from the States

The property tax revolt of the 1970's and 1980's saw many new restrictions placed on local government budgets. Most of these restrictions took the form of local tax and expenditure limitations (TELs) which focused on property taxes. The purpose of this study is to examine whether or not local TELs have reduced local government wages and employment. Anticipating the results, the author demonstrates, using a panel data set on local government wages and employment (1972–1992), the following points: TELs decrease local government wages and employment; the stringency of the TEL law matters; and public sector unions neutralise the constraining effects of TELs.

The Effect of Tax and Expenditure Limitations on the Revenue Structure of Local Government, 1962–87

This study estimates the impact of local tax and expenditure limitations (TELs) on the level and structure of local government revenue. Using a panel data set on 2955 counties (1962-87), this study demonstrates that TELs decrease the level of property and "other" taxes, but increase the level of miscellaneous revenue, partially offsetting the decrease in taxes. Thus, TELs shift the revenue structure of local government away from taxes and toward miscellaneous revenue. However, more stringent TEL laws eliminate local government's ability to increase the level of miscellaneous revenue to offset the decrease in taxes.

Do Tax and Expenditure Limitations Affect Local Government Budgets? Evidence From Panel Data

During the 1970s and 1980s, state governments imposed many new more restrictive tax and expenditure limitations (TELs) on local governments. Many theories have been advanced to explain the new wave of TELs. The majority of these explanations suggests that voters found local government had become larger than desired, and thus the intended effect was a reduction in government size and growth. The purpose of this study is to investigate empirically whether state-imposed local TELs have been successful in reducing both the size and growth of local government, as well as decreasing local government's reliance on the property tax. Anticipating the results, the author demonstrates, using a panel data set on local government budgets (1972-1992), the following two major points: (a) TELs decrease both the level and growth of expenditures and revenues and (b) TELs decrease the level and growth of property taxes.

DO TAX AND EXPENDITURE LIMITATIONS AFFECT THE SIZE AND GROWTH OF STATE GOVERNMENT?

This paper focuses on citizens' ability to restrict the size and growth of state government through the use of tax and expenditure limitations (TELs). Most TEL laws are not designed to stop public sector growth but are intended to cap it relative to personal income growth. Evidence indicates that the design of TEL laws increases the elasticity of government size (and growth) with respect to income. Thus, TEL laws, as they currently are written, allow states with high income growth to keep increasing the size of the public sector. Meanwhile, they prevent states with low income growth from doing likewise. While TELs restrict government size and growth in states with below average income, in general they have no significant effect on the size or growth of government. Therefore, as long as income growth is high, TELs end up as little more than political cover for state legislatures.

The Effectiveness of Tax‐Expenditure Limitations: A Re‐evaluation

Abstract. A 1982 study of the efficacy and impact of tax and expenditure limitations (TEL) is updated. Utilizing various statistical comparisons, growth in expenditures and revenues in states with TELs is compared to growth in states without a TEL in place. This comparison matches growth in the pre tax revolt years with growth in the post revolt years. In all cases the statistical tests show that the existence of a TEL has had virtually no impact on the growth of statewide expenditures or revenues. Additionally, while aggregate state expenditures and revenues exhibited some decline during the tax revolt years, this decline was short‐lived and has since been reversed. Thus, the primary implication is that TELs as presently construed are an ineffective means of limiting growth in state budgets

The Distributional Effects of New Jersey's Tax and Expenditure Limitation

When state governments issue general rules that dictate the spending or tax policies of varied local municipalities, they distort local government outcomes. One example of this is state limitations on local government authority to levy taxes and make expenditures. Although state-imposed tax and expenditure limits (TELs) have been used throughout much of the United States's history, they have recently stimulated attention in both the mass media and the academic press. In practice, TELs can be divided into limitations on the authority of local governments to (1) make expenditures and (2) collect property taxes.' According to a 1981 tabulation of the Advisory Commission on Intergovernmental Relations (ACIR), (reprinted in Gold [1983] p. 112), 46 states had some kind of limitation on local (County, Municipal, or School) governments' ability to collect property taxes and 6 states imposed general expenditure limitations on local governments. Many of these controls are quite recent in origin. In fact, all but 18 of the 46 states with property tax limits enacted them after 1970 (though some may have had earlier laws restricting the use of the property tax), and all of the general expenditure limits were enacted after 1970. A particularly rapid wave of TELs followed California's approval of Proposition 13, which reduced property taxes there to one percent of assessed value in June 1978. In November 1978, just five months after Proposition 13 was approved, voters in Alabama, Michigan, Nevada, and Texas approved legislation or constitutional amendments that reduced the authority of local governments to raise taxes.2 While many TELs set maximum property tax rates and expenditure limits that do not appea to have much effect on the behavior of l cal governments, others such as those in California, Massachusetts, and New Jersey do a pear to be binding on many localities. Several r cent studies have attempted to empirically measure the effects of TELs.3 The most well known of these studies is a 1977 ACIR study that used a dummy variable indicating the pres nce or absence of property tax rate and/or levy limits along with other independent variables to explain total per capita, local, own-source, government expenditures in each of the 50 states. Primarily because the estimated parameters of these dummy variables were negative and significantly different from zero, the ACIR concluded that TELs have reduced government spending. Further analyses showed the average TEL reduced spending 6 to 8 percent. Inman's (1979b) paper which used fiscal year 1966-67 data also employed dummy variables to indicate the presence or absence of various kinds of tax rate limits but used data disaggregated at the city level. Inman found a positive and insignificant coefficient on all dummy variables and concluded that efforts to regulate local taxation in 1967 through