Sunday, May 25, 2008

A short explanation of Proposition 2 and 1/2

I have been asked a number of questions about Proposition 2 and 1/2.

It is a proposition that was passed by initiative in 1980.

It passed narrowly in Longmeadow. 4,330 YES and 4,155 NO - 412 BLANK
8,897 citizens voted on the question.

Parts of the initiative have been changed by the legislature. What is left of it primarily has an effect on local property taxes.

The law limits the levy limit of a particular town. The levy is the term for the amount of money that a town is able to collect in taxes. To illustrate the principle let's use a simple example. Suppose that in fiscal 2001 the levy limit is $1,000,000.00. Under the terms of the law the most that the town can collect in fiscal 2002 is 2 and 1/2% above what they collected in 2001.

So if fiscal 2001 was $1 million, the legal limit for fiscal 2002 is $1 million plus 2 and 1/2% which equals. $1,025,000.00.
This is the new legal levy limit.

If the town decides that it wants to raise more money than allowed by the 2 and 1/2 formula, it must take the question to the voters and ask for an override.

This is a simple majority vote YES or NO.

For our example, let's say that the town government wants to set the levy limit at $1,300,000.00, instead of the $1,025,000.00 allowed by the law. Again following the law, it must place the question before the voters for their approval. In this example the voters would be asked to approve an override of $275,000.00.

If this override passes, the levy limit base for fiscal year 2003 will be $1,300,000.00 plus a 2 and 1/2% increase.
plus $32,500.00
Total $1,332,500.00

Proposition 2 and 1/2 does not forbid tax increases on property. It limits their increase, unless a majority of the local tax payers want to raise them to a higher level.

Why would people vote to raise their taxes higher than the minimum? They would vote to raise their taxes if they wanted to see more services provided by the town. They might want to increase the library budget, the school budget or the public works budget. Or they may vote to raise the level of services of all three departments. They might want to add teaching staff, raise wage or benefit packages (as a result of collective bargaining with labor unions).

The important thing to remember is that the town government can not raise taxes above the 2 and 1/2% limit without asking the town's voters for their approval.

Whether the voters wish to approve of an override is up to the wisdom of the voters. It is their judgement that will be passed on the wisdom of the expenditures.

A rational voter will not reject an override request out of hand.

Instead he or she should ask what the money is going to be used for and what benefit would accrue to the town. He or she could then weigh that benefit against the cost of the tax increase. People in different economic circumstances might perceive the benefits and the costs differently.

One final comment-

There are a number of costs that the town can not control. Oil prices, inflation, and health insurance increases are just some examples of costs that a town can not control. An increase in the school age population would probably also require the hiring of more teachers and the purchase of more supplies. If a town wishes to maintain a level service budget, as opposed to a level funded budget, it will probably have to ask for more revenue from its citizens to match that level of service.

John J. Fitzgerald

1 comment:

John J. Fitzgerald said...

I forgot to list my sources of information. Here they are


Massachusetts Election Statistics - 1980
Public Document 43

Levy Limits: A Primer on Proposition 2 and 1/2
Massachusetts Department of Revenue - Division of Local Services