This paper examines the impact of a specific local tax limit, Proposition 2½ in Massachusetts, on the fiscal behavior of cities and towns in Massachusetts and the capitalization of that behavior into property values. Proposition 2½ places a cap on the effective property tax rate at 2.5 percent...

At least 30 states, including Connecticut, Maine, Massachusetts, and Rhode Island, operate under “tax and expenditure limitations” (TELs): formula-based budgeting requirements that apply specific limits to expenditures, appropriations, or revenue collections by state or local government....