Exploring the Tax Revolt: an Analysis of the Effects of State Tax and Expenditure Limitation Laws

Abstract

This article explores what has come to be known as the Tax Revolt, which reached Abstract its zenith during the late 1970s with the widespread enactment of fiscal constraints at the state and local level in the United States. The focus here is on expenditure and revenue limitation laws and their effects on the growth of state government. To consider whether these laws have been effective in constraining the growth of government, an empirical analysis is conducted for the states that have enacted such laws. Data is analyzed from these states over a thirty-five year period, and considers the effects on tax growth due to the presence of a limitation measure. The results show quite strongly that revenue and expenditure limitation laws can be effective tools to contain tax burdens. The results also indicate that the form of the constraint is important and that the effect of limitation rules may also be tied to other constraint mechanisms.

For Whom the TEL Tolls: Can State Tax and Expenditure Limits Effectively Reduce Spending?

“…Previous studies explore the effects of TELs by making cross-state comparisons, often supplemented by multiple observations of each state's fiscal activities over time (Abrams and Dougan 1986;Misiolek and Elder 1988;Elder 1992;Shadbegian 1996;Mullins and Joyce 1996;Shadbegian 1998;Bails and Tieslau 2000;New 2001;Mullins 2004). They typically regress some measure of a state's fiscal behavior upon a dichotomous variable indicating the presence in each state of their institution of interest (a treatment) as well as a set of covariates or "control factors" that are meant to make the states in the cross-state comparison actually comparable.…”

“…For example, Elder (1992) regresses taxes collected on dummy variables indicating expenditure limits and revenue limits, along with a vector of control variables for the years . He finds differential effects based on the type of limit enacted, noting that "States with…”

Economic Impacts of a Property Tax Limitation: A Computable General Equilibrium Analysis of Oregon's Measure 5

“…Economic analysis of property tax limitations has focused primarily on the impact of these limitations on tax revenues and the shifts in responsibilities between state and local government (Cox and Lowery 1990;Elder 1992;Matsusaka 1995;O'Sullivan, Sexton, and Sheffrin 1995;Preston and Icniowski 1992). Analysis is usually limited to examination of the direct effect of policy changes on tax revenue forecasts and interagency budget allocations.…”

California's Once and Future Budget Crisis: No Country for Old Menor Young Mothers, Sick Children, or Even Otters

“…First, it focuses controls on the expenditure side, not the revenue side, where prior experience indicates there has been greater success (Elder 1992;. It addresses constitutional rules, which have been more effective, rather than relying on statutory measures alone to control spending (New 2001;New and Slivinski 2005).…”