Massachusetts Proposition 2.5 (1980)
Proposition 2½ (Mass. Gen. Laws Ch. 59 § 21C), also known as Question 2, is a Massachusetts statute which limits property tax increases by Massachusetts municipalities. It was passed by ballot initiative in 1980 and went into effect in 1982. The name of the initiative refers to the 2.5% annual limit on the increase in taxes that a municipality is permitted. It is similar to other tax revolt measures passed around the same time in other parts of the United States.
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.
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%), one of the highest automotive taxes of its kind in the United States. Proposition 2½ lowered this rate to only $25.00 per $1,000 of car valuation, resulting in a 2½ per cent excise tax rate.
Proposition 2½ excludes four cases from the tax levy increase:
- "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 type of exclusions granted by the majority those voting in a in municipal referendum:
- "Capital exclusion": Capital expenditure for the upcoming fiscal year;
- "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); or
- Water/sewer debt: For certain water and sewer system debt.
Override / Underride
Municipalities may exceed or reduce the limits with the prior approval of the majority those voting in a in municipal referendum to:
- "Operational override": Override the increase limit; which also raises the Massachusetts vehicle excise tax back to 6.6% for a given community.
- "Underride": The levy limit is reduced. Such a vote can be initiated by popular petition or the municipal legislature.
- Proposition 13, the California tax limitation law that inspired the passage of Proposition 2½.
- Tax revolt
- ↑ Mass. Gen. Laws Ch. 59 § 21C, via Mass.gov
- ↑ PROPOSITION 2½, by Susanne Tompkins, via McCormack Institute – see tenth paragraph on linked page
- ↑ Mass. Gen. Laws Ch. 59 § 21C(i½), via Mass.gov
- ↑ Mass. Gen. Laws Ch. 59 § 21C(j,k), via Mass.gov
- ↑ Mass. Gen. Laws Ch. 59 § 21C(n), via Mass.gov
- ↑ Mass. Gen. Laws Ch. 59 § 21C(g), via Mass.gov
- ↑ Mass. Gen. Laws Ch. 59 § 21C(h), via Mass.gov