The Property Tax and Local Finance

By C. Lowell Harriss | Go to book overview

Proposition 2½: The Response to
Tax Restrictions in Massachusetts

LAWRENCE SUSSKIND

CYNTHIA HORAN

In what may be a transcendent political development of the 1980s, "Massachusetts now rivals California as a laboratory for supply-side economic theory ..." wrote Rowland Evans and Robert Novack in their column on July 21, 1981. But the catalyst for this political development, Proposition 2½, continues to prompt predictions of disaster as frequently as words of praise. In July 1981, the Massachusetts Department of Revenue estimated that cuts in property and automobile excise taxes mandated by Proposition would equal $485 million in FY 1982 alone. It also projected that the distribution of tax losses would be very uneven. Forty-three of the state's 351 municipalities—including its largest cities and the capital, Boston —faced property-tax levy reductions of 45 percent. Others faced no losses at all. Moreover, unlike California when Proposition 13 was passed, Massachusetts had no state budget surplus. Walter V. Robinson, a reporter for the Boston Globe, dubbed Proposition "shock therapy for politicians who are comfortable adding programs and increasing spending but uncomfortable eliminating programs and slashing spending." 1

In the fall of 1982, more than a year after voters approved Proposition by a three-to-two margin, evaluations of its consequences were just becoming available, though an exact determination of its impacts will not be available for several years. In the meantime, however, there is a great deal to be learned. In June 1980, the IMPACT: Project, a consortium of university researchers based at the Massachusetts Institute of Technology, initiated budgetary case studies of thirteen Massachusetts cities and towns. The goal of this monitoring effort was not to predict statewide effects but rather to document the ways that communities facing large tax rollbacks handled the task of deciding what and how to cut. Case-study sites included 5 of the commonwealth's 39 cities and 8 of the 312 towns that, while generally facing large levy losses, are characterized by

____________________
1
Boston Globe, May 12, 1981.

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