Center for Policy Research
Property Tax Web Series
Did State Imposed Tax and Expenditure Limits Reduce the Fiscal Size of Local Governments? Revisiting the Evidence
Justin M. Ross, John D. Stavick, Patrick Carlin
December 2021
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Abstract
This paper revisits the research question of whether or not state-on-local tax expenditure limits (TELs) reduced the fiscal size of local governments.
The often cited research on the subject appeared in the 1990s and early 2000s with the consensus conclusion that these policies did have that consequence, however this literature had many limitations in research design common to the work of that time. We update the data, empirical strategy, and inferential techniques for American city and county governments.
Namely, we explore results using more contemporary identification strategies that includes cross-state border differencing and stacked differences-indifferences.
PRELIMINARY: The simple panel with two-way fixed effects reproduce the large estimates of the previous literature. The border discontinuity design has a similar pattern of findings but indicates these policies are substantially smaller than those provided by the previous literature.
Examining each state experiment against a common “never adopt” control group produces far more heterogeneous results that in aggregate suggest the policies are ineffective and even increase the fiscal size of government.
This paper was presented by Justin M. Ross on December 17, 2021 as part of the 2021-2022 Syracuse Webinar Series on Property Tax Administration and Design.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.