Tax Limitations Research Articles

Household mobility and the political economy and welfare effects of local tax limits

I apply a Tiebout model of multiple local jurisdictions to study the political economy and welfare effects of state limitations on the taxing powers of local governments, investigating the effects of such restrictions on housing markets, community composition, and the types of expenditures undertaken by local governments. The Tiebout model in this paper is distinguished by voters choosing values of multiple local policy (tax and expenditure) instruments, a mixture of renters and owners residing in each community, and different degrees of household mobility. I characterize and provide sufficient conditions for voting equilibrium even with multiple policy instruments and varying housing tenure by developing a novel application of the Besley and Coate (1997) model of representative democracy. The different degrees of household mobility following the introduction of tax limits have significant impacts on equilibrium values, the predicted level of political support, and the welfare effects associated with these tax limits. In addition, almost none of the tax limits increase overall welfare, even though many gain majority support. The only case that is predicted to have majority support and increases welfare is when all households are mobile, head and income taxes have previously been constrained, and property taxes are then limited. These results accord well with the hypothesis of Vigdor (2001)—that much political support for tax limits comes from a desire by individuals to limit taxes in localities other than their own.

Examining the fiscal impact of tax and expenditure limitations on municipal governments: a rule design approach

ABSTRACT The effect of state fiscal restrictions on local governments is often debatable. While the institutional heterogeneity of such controls is often thought to generate variations in outcomes, more theoretical and empirical attention is imperative. This study aims to address the needs with a particular focus on state-imposed tax and expenditure limitations on municipal governments (municipal TELs), one of the long-standing forms of state pre-emption in the United States. Specifically, it adopts a rule design approach to institutions to capture different institutional designs of municipal TELs, and disentangles their impacts on municipal revenues and expenditures. The results of this study extend the extant literature, suggesting that the fiscal impact of municipal TELs, and more broadly fiscal restrictions, is dependent upon their rule design rather than their presence or stringency.

Cap and Gap: The Fiscal Effects of Property Tax Levy Limits in New York

Abstract This is the first study to examine the fiscal effects of the New York property tax levy limit, using variation from the degree of fiscal stringency across school districts and over time in its first five years of implementation. Based on a difference-in-differences estimator, coupled with an event study specification, we find that the tax limit has imposed a real cap on many school districts; that is, at-limit districts’ total current expenditures per pupil are significantly lower than what they would have spent absent the limit. For those affected school districts, this expenditure gap does not come from spending on teacher salaries or fringe benefits but rather from other instructional salaries/expenses, central administration, transportation, interfund transfers, and undistributed spending. We also find heterogeneity in the constraining effects of the tax limit across different need-based groups of school districts.

Die Corona-Krise ist ein Brennglas bestehender Probleme

Abstract The Corona crisis marks a significant turning point in the Federal Republic’s national budget. All levels of the overall budget are deep in the red: federal, state, local and social security. This stress on public budgets and social security systems will not suddenly disappear after the pandemic – rather, policy makers face long-term challenges. Public finances must be consolidated! Five theses outline the issue – before, during and after the Corona crisis: The federal budget was structurally out of order even before the Corona crisis. The Corona crisis is only a magnifying glass for budget policy problems. The debt brake is indispensable, both when the economy is strong and weak. We need a mix of tax limits, austerity policies and investments. Tax increases and more bureaucracy are hampering economic growth!

State fiscal constraint and local overrides: a regression discontinuity design estimation of the fiscal effects

Despite abundant evidence regarding the influence of US state-imposed tax and expenditure limitations on local governments, the causes and consequences of local overrides remain largely unexplored. This article comprehensively examines the fiscal effects of local overrides of Massachusetts’s state-enforced property tax limit. Existing evidence has shown that pressure from powerful local interest groups, such as public schoolteachers and public employees, is crucial for determining agenda-setting and the successes or failures of measures overriding the statewide property tax limit. In that sense, fiscal constraints are able to curb bureaucrats’ budget-maximizing behaviors. Empirically, a regression discontinuity design estimation shows that local property tax limit overrides increase local property taxes and total revenues, decentralize the state–local fiscal relationship, and improve local budgetary balance. However, overrides do not affect local government spending.

Property tax limits and female labor supply: Evidence from the housing boom and bust

This paper investigates whether and how property tax limits impact female labor supply during the housing boom and bust. Theory predicts that property tax limits increase non-labor income during the housing boom and decrease non-labor income during the bust periods, leading to opposite effects on labor supply during the boom and bust periods. Exploiting exogenous variation of housing market conditions in the housing boom and bust and geographic changes of property tax limits in the cross-state Combined Statistical Areas, we test the theory and find that property tax limits reduced female labor force participation by 0.7 to 1.4 percentage points during the housing boom (2005–2006) as predicted. In contrast, the impact of property tax limits on female labor force participation during the housing bust (2008–2009) is always positive but not statistically significant in most specifications. These results are consistent with our model and provide new evidence of housing wealth effects in the labor market.

Classifying public policies with Moral Foundations Theory

Morality policy researchers have long grappled with the difficulty of determining objective or empirical criteria for classifying policies with moral content. A newer, but related, critique has suggested that we cannot classify morality policies by their substantive content, because policy debates employ moral frames for strategic purposes. This paper joins this debate by using Moral Foundations Theory to conduct quantitative content analyses of the supporting and opposing arguments in Voter Guides that accompanied referenda on enacting (1) the death penalty, (2) same-sex marriage, (3) physician-assisted suicide, (4) Official English, (5) recreational marijuana, (6) medical marijuana, (7) abortion funding bans, (8) tribal gaming, (9) minimum wage increase, (10) Right to Work legislation, and (11) property tax limits. MFT quantitative content analysis shows that frames with ostensibly instrumental arguments hold moral content. Our findings endorse the argument that researchers should differentiate between pure and mixed morality policies and other non-morality policies with decidedly less moral content.

Реален ли сценарий повышения доступности бензина в России

<span>В последние годы на российском рынке моторных топлив сформировалась система противоречивых требований, что вылилось в резкий рост цен в 2018 г. В результате был введен инструмент обратных акцизов и предельной оптовой цены, что изменило систему ценообразования. Нефтяные компании продолжают использовать цену нетбэк в качестве ориентира, но вычитают из нее обратный акциз и некоторую скидку для внутреннего рынка, определяя таким образом оптовую цену. За 2015–2019 гг. доступность бензина в России снизилась на 12% и упала ниже уровня 2009 г. В базовом сценарии, согласованным с актуальным прогнозом Минэкономразвития России, доступность бензина повысится за счет роста реальных доходов населения, но останется ниже уровня 2015 г. При этом возможна реализация сценария повышения доступности бензина через замедление роста цен на моторные топлива. Это позволит перераспределить часть доходов государственного бюджета и нефтяного сектора (которые, вероятно, подверглись бы резервированию) в пользу населения и неэнергетических отраслей экономики, то есть именно туда, где необходимо качественное улучшение положения дел.</span>

State Fiscal Constraints and Local Responses: Evidence from the Property Tax Limit Overrides in Massachusetts

AbstractThis research examines the determinants of the likelihood of property tax limit override attempts and successes in the context of Massachusetts's Proposition 2½. The authors apply the “Leviathan” government theory, median voter theory, and agenda‐setting theory to develop theoretical expectations and use data from Massachusetts municipalities for 1991–2013 as a sample for empirical tests. Override attempts are not randomly proposed; therefore, the two‐stage Heckman selection model is used to address selection bias in the investigation of the likelihood of override successes. Results show that a higher property tax rate reduces the likelihood of government officials’ override attempts, but previous override experiences have a positive influence. Voters bearing a higher property tax rate are less likely to approve the override, but override experiences in the previous year and the “menu” approach increase the likelihood of approval. Relatively more evidence supports the Leviathan government and agenda‐setting theories in explaining overrides of Massachusetts's property tax limit.

Fat taxation in India: A critical appraisal of need, public health impact, and challenges in nationwide implementation.

National Nutritional Monitoring Bureau survey (2017) has found that more than half of the adults in India were overweight and obese. To halt this rising epidemic, development of various policy measures has been suggested in National action plan for prevention and control of noncommunicable diseases. One such measure is the introduction of fat tax which is a surcharge or tax placed on food and beverages containing high amounts of fat. Government of India has made various direct budgetary initiatives for boosting the sectors related to the production of items rich in fat, sugars and salt without realizing the potential public health consequences. Hence, increasing the taxes for unhealthy junk foods should encourage the people to take healthier food options which in turn lead to positive impact on health. However, fat taxationfaced several challenges during implementation in countries like Denmark, Hungary, France and United States. Major challenges were the taxation debate, setting tax limit and encroaching into the autonomy rights of people. Evidences have shown that taxation alone cannot bring down the burden of non-communicable diseases but should be combined with measures like subsidies and access to healthy food items, public health education campaigns and programmes.

New Fiscal Rules for State and Local Government: A Question of Institutional Complementarity

New fiscal rules, referred to as tax and expenditure limits (TELs), were enacted in many states during the tax revolt launched in the 1970s. Over the past two decades a second generation of TELs, patterned after Colorado’s TABOR Amendment, was introduced in the states. The new fiscal rules have had a limited impact in constraining fiscal policy in the states. Many state and local governments are now incurring debt at an unsustainable rate, and citizens have lost confidence in the ability of these governments to pursue prudent fiscal policies. The problem with new fiscal rules enacted in the states is not just design flaws, it is the absence of complementary institutions that are prerequisites to effective fiscal rules. In this study we focus on three institutional reforms: fiscal autonomy for subnational jurisdictions; capital market and legal reforms to restore bankruptcy procedures for state as well as local government; and strengthening institutions of direct democracy to give citizens more ‘voice’ in enacting fiscal rules and pursuing fiscal policies. New fiscal rules are effective when enacted with broad support within the community, and with effective fiscal rules in place citizens can again gain confidence in their state and local governments. Growing this ‘dynamic credence capital’ will be essential for state and local governments to solve the debt crisis.

Do Tax and Expenditure Limits Influence Federal Lobbying by State and Local Governments? Evidence from A Panel Dataset

A large body of literature has emerged regarding the overall effects and efficacy of state and local tax and expenditure limits (TELs). Importantly, much of this literature has detailed some of the unintended consequences of those fiscal constraints. This paper adds to that latter strand of the literature by evaluating the relationship between state and local TELs and the prevalence of federal lobbying expenditures by those governmental units constrained by such a limit. With the inclusion of several different measures of state and local TELs, panel data spanning several years, and various specifications, the results indicate that fiscally constrained state and local governments increase federal lobbying efforts, though the result is far less robust for states. Disaggregation of these TELs suggests little association between lobbying and a revenue limit at the state level (though a stronger positive association exists with expenditure limits), while a property tax limit (expenditure limit) is positively (negatively) associated with lobbying expenditures at the municipal level.

Optimal fiscal limits with overrides

This paper studies optimal fiscal limits in the context of a simple political economy model. A politician chooses the level of taxation for a representative citizen but is biased in favor of higher taxes. A constitutional designer sets a tax limit before the citizen's preferred level of taxation is fully known. The politician is allowed to override the limit with the citizen's approval. The paper solves for the optimal limit and explains how it is impacted by the possibility of overrides. The paper also shows that the citizen's welfare can be enhanced if the designer imposes a limit on the politician's override proposals.

Tax Limits and the Future of Local Democracy

Property tax limits are state-level laws that place caps on local governments’ tax rates and revenue. These statutory limits, which put pressure on already strapped cities and counties in forty-six states, present an inexorable dilemma for local policymakers. On the one hand, they may cause cuts to vital services, bankruptcy, and reliance on regressive revenue sources. At the same time, however, tax limits may reflect genuine concerns about government profligacy and nonresponsiveness. While much research has focused on the first side of the dilemma—examining the laws’ fiscal consequences—this Article explores the second, probing how tax limits affect the distribution of political power between local voters and policymakers. The Article makes three contributions. First, it argues that property tax limits have focused too strongly on a tax reduction goal to the exclusion of other potential objectives. Instead, tax limits can improve local public control and oversight of government fiscal decisions. Prioritizing public control would increase voter satisfaction and expand opportunities for taxpayer voice. Second, having identified this additional tax limit objective, the Article evaluates the laws’ potential efficacy in achieving it. To do so, the Article identifies a list of statutory features that enhance or undermine local public control. The Article then surveys property tax limits in all fifty states, and is the first to code each statute for features affecting the power of local voters. The survey results demonstrate that tax limits in most states undermine public control by reducing voter power, instead shifting power to governors and state legislatures and prioritizing a pure tax reduction goal. The Article’s third and final contribution is a menu of policy reforms for state and local actors. Distinct from others commentators who tend to advocate wholesale embrace or repeal of tax limits, this Article suggests reforms that respect the laws’ public appeal while seeking to soften their harsher consequences. Assuming that the state-set limits will persist, mayors, city councils, and state legislators can use the suggested reform principles to reinvigorate local democracy and, perhaps, address some of the concerns that led to the limits being adopted in the first place.

New Thinking About Jurisdictional Time Periods in the Tax Code

This Article explores the extent to which statutory periods of limitation in the Code are properly viewed as jurisdictional restrictions on the authority of the Tax Court. Starting in the mid-2000s, the Supreme Court began thinking about jurisdictional time limits in a new way. Applied of this new thinking to tax limitation periods has been limited and there is not comprehensive treatment of how this new thinking should apply the the Tax Code. This Article considers how the Supreme Court’s new thinking should apply to four time periods in the Code. Three govern access to the Tax Court: the period in section 6213 for contesting a Notice of Deficiency; the periods in sections 6320 and 6330 for contesting the outcome of an IRS Collection Due Process (CDP) hearing; and the period in section 6015(e) for contesting a denial of innocent spouse relief. The fourth is the two-year period in section 6532(a)(1) to file a suit for refund of taxes in either federal district court or the Court of Federal Claims. The Article first explains the Supreme Court’s new thinking. The Article next sets up the procedural contexts in which the four limitations periods appear. Then it analyzes each of the four periods. The Article concludes that for the deficiency and CDP time periods the new thinking leads to different conclusions from existing lower court precedents, which are now unlikely to survive Supreme Court scrutiny. In contrast, recent opinions about section 6015(e) have reasonably applied the new thinking in typing that limitations period as jurisdictional. Finally, a straightforward analysis of section 6532(a)(1) under the new thinking reveals it to be a plain-vanilla, claims-processing rule, contrary to past court decisions. Keywords: Jurisdiction, Tax Court, Refunds, claims processing, limitation periods, statute of limitations, limitations, Collection Due Process, CDP, Innocent Spouse, spousal relief, deficiency, 6213, 6330, 6015, 6532

Starving counties, squeezing cities: tax and expenditure limits in the US

Policy Highlights We create a 50 state Tax and Expenditure Limits (TEL) severity index by government type. Counties and municipalities differ in their revenue structure and economic functions. TELs constrict counties’ ability to raise revenue. Municipalities broaden revenue sources and debt in response to TEL severity. State aid needs to increase for counties to offset TEL’s restrictive effect. State-imposed local Tax and Expenditure Limits (TELS) are restricting revenue raising ability of local governments across the U.S. We create a 50-state index to measure the severity of TELS by type of tax limitation (rate limit, tax ceilings, etc.) for each type of local government: county, municipality and school district. We find in states with more restrictive TELs, counties are more restricted, while cities reduce their property tax dependence and shift to alternative revenue sources and incur more debt. State aid does not make up the difference. TELs increase stress for all local governments but are most severe for counties.

Local Property Tax Limits in Nebraska: Within-State Variations in Effects

Tax and expenditure limitations (TELs) have been widely imposed on state and local governments. A substantial amount of research has been conducted on the effects of TELs, however, most have assumed that a TEL is equally binding on every local government in the state. This may not be the case; the degree to which a TEL constrains a jurisdiction is dependent on its position and context at the time of the TEL implementation, and, further, the responses of these governments might then be expected to be different over time. This study uses data for counties and special purpose districts in Nebraska, where property tax limits became effective in FY1999; we consider a variety of intended and unintended consequences over the 15 years under the limit. Our findings show the fiscal responses to and effects of the limits and how they vary between county governments that were more versus less restricted.

Local Governments Run Amok? A Guide for State Officials Considering Local Preemption

The Mississippi laws preempting local control of minimum wages and Transportation Network Companies (TNCs) reasserted the authority of state government to overrule local regulations. This raises the question: What circumstances should motivate the use of state authority to interfere with local rule-making? This chapter will provide a framework to guide state officials who are considering local preemption. We will use this framework to analyze four issues that are relevant in Mississippi: 1. The sharing economy; 2. Labor market regulations; 3. Land use regulations; and 4. Tax and expenditure limits. We conclude that state preemption is warranted in situations where local governments enact non-general policies interfering with free exchange via price controls or similar restrictions.

Drift and conversion in metropolitan governance: The rise of California’s redevelopment agencies

ABSTRACTAnalysis of formal institutions in metropolitan governance has focused primarily on observable changes such as statewide property tax limitations and municipal incorporation. By contrast, scholars have devoted little attention to the ways in which changing environmental conditions and shifting interpretations can alter the impact of formally stable institutions. For example, accounts of the diffusion of tax increment–financed redevelopment in California have emphasized the impact of Proposition 13, a statewide tax limitation adopted in 1978. But this diffusion began roughly a decade earlier, as the novel data set in this article indicates, when redevelopment project areas began to proliferate in relatively small and affluent suburban jurisdictions. The data, in combination with a case study, illustrate mechanisms by which stable formal institutions, such as state laws authorizing redevelopment, can contribute to gradual changes in metropolitan governance.

Tax and Expenditure Limitations and Special District Formation

This paper empirically examines the formation of special districts in the United States. It investigates, in particular, the adoption of tax and expenditure limitations (TELs) on local governments to determine how the have motivated special district formation. The paper extends the research agenda by reporting a longitudinal analysis for TELs and special district formation through the post-Proposition 13 tax revolt in the states. Theory from the literatures on special-purpose governments and, on TELs, guides the research – literatures interested in the impact of fiscal institutions on local government reorganization. Main findings are that adoption of one type of TEL – general limitations – is encouraging formation of special districts with taxing powers. Substantively, adoption of general limitations raises the number of taxing districts by approximately 13 percent. A flexible model for panel data, inclusive of fixed effects and time trends, turns out to be crucial for identifying estimates for the impact of TELs in special district formation.