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State and Local Tax Policy: What are tax and expenditure limits?


Tax and expenditure limits (TELs) restrict the level or growth of government revenues or spending to a fixed numerical target or to increases in an index such as population, inflation, personal income, or some combination of these measures. As of 2008, thirty states had at least one TEL. Twenty-three states imposed state spending limits, four had state revenues limits, and three had both. Another way states limit growth in revenues is through requiring legislative supermajority or voter approval requirements for passage of new taxes. Sixteen states had such requirements in place in 2008 (Waisanen, 2008). In addition, forty-six states limited property taxes or other revenues or expenditures of local governments (Mullins and Wallin, 2004). Several local governments also operated under their own locally imposed TELs (Brooks et al. 2007).

See Also

Data Sources

Waisanen, Bert, "State Tax and Expenditure Limits 2008 ," National Conference of State Legislatures (Washington, 2008).

Further Reading

Brooks, Leah, Emily Gaus, Justin Phillips, Michelle Segal and

Kieran Shah. "Tying Your Own Hands: Municipally-Imposed Tax and Expenditure Limits," Discussion Paper, 2007.

Gordon, Tracy. "The Calculus of Constraint: A Critical Review of State Fiscal Institutions" in Elizabeth Garrett, Elizabeth Graddy, and Howell Jackson, editors, Fiscal Challenges: An Interdisciplinary Approach to Budget Policy. New York, NY: Cambridge University Press (2008).

Knight, Brian J. "Supermajority Voting Requirements for Tax Increases: Evidence from the States," Journal of Public Economics 76 (2000): 41-67.

McGuire, Therese J. and Kim S. Rueben, "The Colorado Revenue Limit: The Economic Effects of TABOR ," Economic Policy Institute Briefing Paper (Washington, March 2006).

Mullins, Daniel R. and Bruce A. Wallin, "Tax and Expenditure Limitations: Introduction and Overview," Public Budgeting and Finance 24 (2004): 2-15.

Poterba, James M. and Kim S. Rueben. "Fiscal Rules and State Budgeting Costs Evidence from California and Other States ," San Francisco, CA: Public Policy Institute of California (2001).

Authors: Tracy Gordon and Kim Rueben

Last Updated August 20, 2009

Category: Taxes

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