1980 Massachusetts Proposition 2½

Referendum limiting taxation Proposition 2½ (59 21C) is a Massachusetts statute that limits property tax assessments and, secondarily, automobile excise tax levies by Massachusetts municipalities. The name of the initiative refers to the 2.5% ceiling on total property taxes annually as well as the 2.5% limit on property tax increases. It was passed by ballot measure, How We Got Here: The '70s Frum David David Frum 2000 Basic Books New York, New York 0-465-04195-7 325 https://archive.org/details/howwegothere70sd00frum/page/325 registration specifically called an initiative petition within Massachusetts state law for any form of referendum voting, in 1980 and went into effect in 1982. The effort to enact the proposition was led by the anti-tax group Citizens for Limited Taxation.http://www.commonwealthmagazine.org/Article-Import-Latest/1996/Summer/The-Odd-Proposition.aspx The Odd Proposition Dave Denison Summer 1996 Commonwealth Magazine 2011-12-16 https://web.archive.org/web/20120607122738/http://www.commonwealthmagazine.org/Article-Import-Latest/1996/Summer/The-Odd-Proposition.aspx 2012-06-07 dead It is similar to other "tax revolt" measures passed around the same time in other parts of the United States. This particular proposition followed the movements of states such as California.LADD HELEN F. WILSON JULIE BOATRIGHT Why Voters Support Tax Limitations: Evidence from Massachusetts' Proposition 2-1/2 1982-01-01 41862431 National Tax Journal 35 2 121–148 10.1086/NTJ41862431 232212231 Results thumb|300px|Results by county: #B6C8D9 Yes #B6C8D9 50–60% #7D9CBB 60–70% #dedebd No #dedebd 50–60% #bcbc83 60–70% Proposition 2½ appeared with five other initiatives presented to Massachusetts voters on November 4, 1980. It was question 2 on the ballot, "Limiting local taxes (Proposition 2 1/2)".https://www.sec.state.ma.us/ele/elebalm/balmresults.html#year1980 https://web.archive.org/web/20130120060603/http://www.sec.state.ma.us/ele/elebalm/balmresults.html#year1980 dead January 20, 2013 Statewide Ballot Questions — Statistics by Year: 1980 sec.state.ma.us March 11, 2018 ResponseVotes% Yes 1,438,768 56% No 988,839 40% blank 129,060 5% Real and personal property taxes Under Proposition 2½, a municipality is subject to two property tax limits: Ceiling: The total annual property tax revenue raised by a municipality shall not exceed 2.5% of the assessed value of all taxable property contained in it. Increase limit: The annual increase of property tax cannot exceed 2.5%, plus the amount attributable to taxes that are from new real property. These limits refer to the entire amount of the annual tax levy raised by a municipality. The property taxes are the sum of: (a) residential real property; (b) commercial real property; (c) industrial real property; and (d) business-owned personal property. In practice, it usually limits the tax bills of individual taxpayers, but only as an indirect result. The limits for each community are calculated by the Massachusetts Department of Revenue.https://www.youtube.com/watch?v=0mCI6iqtGnM What is Proposition 2 1/2? Massachusetts Division of Local Services February 22, 2016 2:58 Video YouTube The Department of Revenue is responsible for determining the annual levy limit and ceiling for each community and ensuring the tax levy fixed by the setting of the tax rate complies with Proposition 2 1/2. A side effect of Proposition 2½ is that municipality income will decline in real terms whenever inflation rises above 2.5%. Historically inflation has been above 2.5% for a significant majority of the years since 1980 (22 out of the 28 years up to 2008),April 2022 Data as of 2008 thus resulting in a real decline in local tax rates and local spending ability. An exception allows the citizens of each municipality to override the 2½ restriction to address specific needs of the community thus giving the citizens direct control over their taxation. Vehicle excise tax The excise tax for automobiles registered in Massachusetts was also lowered by Proposition 2½. Previously, this tax was levied at a rate of $66.00 per $1,000 of car valuation (6.6%). Proposition 2½ lowered this rate to $25.00 per $1,000 of car valuation, resulting in a 2½ per cent excise tax rate,http://www.mccormack.umb.edu/dean/docs/IssueBook/prop2half.html Proposition 2 1/2 Susanne Tompkins McCormack Institute dead https://web.archive.org/web/20070314114059/http://www.mccormack.umb.edu/dean/docs/IssueBook/prop2half.html March 14, 2007 but can still increase 264%, to the previous 6.6% tax rate if a Proposition 2½ operational override (see below) is approved by ballot in a community during a general (or special referendum) election. Exclusions Proposition 2½ excludes four cases from the limitation on tax levy increases: "New growth": The Act allows for new growth. So, for example, when a new house is built, the tax levy may increase by the amount of taxes collected from that house. And three types of exclusions granted by the majority of those voting in a municipal referendum: "Capital exclusion": Capital expenditure for the upcoming fiscal year;Mass. Gen. Laws Ch. 59 § 21C(i1 2), via Malegislature.gov "Debt exclusion": For pre-1980 municipal debt or new debt issued for a designated purpose (e.g. bonds issued for a multi-year capital expense);Mass. Gen. Laws Ch. 59 § 21C(j,k), via Malegislature.gov or Water/sewer debt: For certain water and sewer system debt.Mass. Gen. Laws Ch. 59 § 21C(n), via Malegislature.gov Overrides and underrides Municipalities may exceed or reduce the limits with the prior approval of the majority of those voting in a municipal referendum: "Operational override": Override the increase limit.Mass. Gen. Laws Ch. 59 § 21C(g), via Malegislature.gov "Underride": The levy limit is reduced. Such a vote can be started by the Massachusetts initiative petition procedure, or the municipal legislature.Mass. Gen. Laws Ch. 59 § 21C(h), via Malegislature.gov The proposition originally required a two-thirds majority of voters for passage of overrides, but the state legislature changed this to a simple majority in 1981.https://books.google.com/books?id=3WzphyK48eYC&pg=PA64 State-local Relations: A Partnership Approach Joseph F. Zimmerman ABC-CLIO 1995 978-0-275-95235-8 State law still requires a two-thirds vote of the municipal "appropriating authority" to place an override question on the ballot.59 21C(e) March 2017 January 2009, municipalities had requested, via referendum, 4,449 overrides of Proposition 2½, of which 1,798 passed; 16 underrides were requested, of which nine passed.http://www.mass.gov/dor/local-officials/municipal-data-and-financial-management/data-bank-reports/proposition-2-12.html Proposition 2 1/2 Massachusetts Department of Revenue dead https://web.archive.org/web/20111210074115/http://www.mass.gov/dor/local-officials/municipal-data-and-financial-management/data-bank-reports/proposition-2-12.html December 10, 2011 Outcomes Following the mandating of actual revenue reductions within the first couple of years, the effects and results of Proposition 2½ were limited. The lack of significant changes was due in part to the state government increasing general purpose aid to municipalities, which helped them to stay away from budget shortfalls. Effective property tax rates declining and an increase in community taxes were a result of various factors including a 64% increase in real estate aid to municipalities between 1981 and 1988, declining school expenses, and a region wide real estate boom. Reduced revenues in the 1980s caused the state to reduce local aid, which fell 12% in 1990, along with over 30% between 1989 and 1992. Over time, Proposition 2½ would have become more binding due to the fact that it is operated in nominal terms, meaning that the rules it follows do not change in response to prices, costs, or spending.Bradbury, Katharine and Mayer, Christopher J. and Case, Karl E., Property Tax Limits and Local Fiscal Behavior: Did Massachusetts Cities and Towns Spend Too Little on Town Services under Proposition 2.5 (April 1997). Rate split and exemptions While Proposition 2½ constrains the overall amount of taxation, a 1979 lawChapter 797 of the Acts of 1979, An Act Making Changes in the Law Providing for the Taxation of Real Property by Usage Classification (as amended) determines how that tax burden is allocated. Amendment CXII to the Massachusetts Constitution (the "Classification Amendment") was adopted in 1978, and allowed the state legislature to define up to four classes of real estate upon which property taxes could be levied at different rates. State law now defines those four categories as: residential, open space, commercial, and industrial.59 2A defines the classes and 59 38 applies them to municipal property taxes. (This was in response to a Massachusetts Supreme Court ruling that forbade the previous practice of artificially lowering some assessments.Town of Sudbury vs. Commissioner of Corporations and Taxation, 1974) Municipalities may levy property taxes at different rates by adjusting the "residential factor", but state law limits the "CIP shift" from residential and open space to commercial, industrial, and personal property owned by businesses. This depends on a complicated formula,40 56 and 58 1A and as of 2025 the maximum allowed CIP shift varies up to 175% by dollar amount depending on the municipality, with many at 150%.https://dls-gw.dor.state.ma.us/reports/rdPage.aspx?rdReport=taxrate.cip_taxshift&tblCIP_TaxShift-PageNr=11&rdDataCache=9437534115&rdShowModes=&rdSort=&rdNewPageNr=True1&rdRequestForwarding=Form Data Analytics and Resources Bureau CIP Tax Shift June 17, 2025 43 cities and 65 towns adopted a CIP shift in FY2021. Another complicated formula sets a minimum residential factor, often 50% or 65%, which constrains the rate differential between residential and CIP, even if the dollar amount for CIP is low due to a small commercial tax base.58 1A Watertown hit its minimum in 2022, prompting the city to file a home rule petition asking for a reduction to 50%.Watertown News Charlie Breitrose November 28, 2022 Council Approves Tax Rates, Cannot Shift Burden onto Commercial as Much as in Past https://www.watertownmanews.com/2022/11/28/council-approves-tax-rates-cannot-shift-burden-onto-commercial-as-much-as-in-past/ In increase in working from home after the COVID-19 pandemic caused a devaluation of office buildings in Boston, prompting the city to ask in 2024 and 2025 for a temporary increase in CIP shift to 200%.https://www.wbur.org/news/2024/10/24/boston-property-tax-deal-michelle-wu-commercial-residential-newsletter What Boston's property tax shift compromise would mean for homeowners and businesses October 24, 2024 Nik DeCosta-Klipa WBUR A residential exemption up to 35% is allowed for primary residence59 5C (adopted by 15 municipalities in FY2021, shifting taxes to second homes and rentals) in addition to a long list of types of property excluded from taxation (including federal and educational buildings).59 5 Municipalities may also give up to a 10% discount for small businesses (14 municipalities in FY2021, shifting taxes to industrial properties) and a discount of at least 25% to open space (1 municipality in FY2021, shifting taxes to residential properties).https://www.mass.gov/doc/splitting-the-differences-reviewing-tax-rate-shifts/download Splitting the Differences: Reviewing Tax Rate Shifts Susan Whouley, Bureau of Accounts Field Representative August 19, 2021 Division of Local Services, Massachusetts Department of Revenue See also Proposition 13, the California tax limitation law that inspired the passage of Proposition 2½. Colorado Taxpayer Bill of Rights References Further reading https://www.proquest.com/docview/294017249 PROP 2 1/2: VOTE NO The Boston Globe 1 October 27, 1980 March 11, 2018 294017249 limited pqarchiver.com (editorial position) https://www.newspapers.com/clip/18211489/massachusetts_voters_cut_property_taxes/ Massachusetts Voters Cut Property Taxes by 40 Pct. UPI The Town Talk Alexandria, Virginia November 5, 1980 March 11, 2018 newspapers.com External links Levy Limits: A Primer on Proposition 2½ from Massachusetts Dept. of Revenue, Division of Local Services http://roseinstitute.org/initiatives/massachusetts/ Miller-Rose Initiative Database Massachusetts Claremont McKenna College Claremont, CA Rose Institute of State and Local Government Rose Institute of State and Local Government Statewide initiatives adopted by voters...1904 through 2018 Massachusetts Question 2, Limit on Local Taxes Initiative (1980) Category:1980 in the United States Category:1980 Massachusetts ballot measures Category:Massachusetts statutes Category:Property tax ballot measures in the United States Category:Taxation in Massachusetts