Document Type

Research Report

Publication Date



property taxes, Proposition 2 1/2, Massachusetts, tax policy, tax reduction plans


Economic Policy | Public Administration | Public Policy | State and Local Government Law | Taxation-State and Local | Tax Law


On November 4, 1980 the citizens of Massachusetts, by a vote of 59% to 41%, resoundingly endorsed a tax reduction plan known as Proposition 2 1/2. All communities in the Commonwealth were faced with an immediate reduction in their local revenues due to the immediate cut in the excise tax that Proposition 2 1/2 called for, and up to 130 communities will have to implement a 15% reduction in their tax levies for FY 1982.

Already there are protestations from many local officials that they cannot make the required tax cuts without severely reducing the level of local services. The Commonwealth's older cities and towns are caught in a dual bind. On the one hand, they will face a series of tax cuts over the next few years, and on the other, they will have to cope with an annual rate of inflation that is not expected to fall under 10% for the rest of the decade. The combination of the two factors could effectively dismantle the structure of local government in these communities.

Many commentators have interpreted the vote for Proposition 2 1/2 as a protest against the regressive and inordinately high local property tax, and not as a call for a cut in services. In short, this view holds that people want to cut the price of services but not the quantity of services.

This view also holds that the public will be more amenable to a restructuring of the state and local tax systems when they begin to feel the pinch of the service cuts that will follow the implementation of Proposition 2 1/2. Accordingly, a number of proposals are already being advanced that would restructure the state tax system, and provide for an increase in state aid to the local municipalities to compensate for the revenues lost under Proposition 2 1/2 . Other proposals call for modifying some of the more severe provisions of Proposition 2 1/2 and allow the option of a local override.

The debate, therefore, is being joined at many levels. It involves state and local government officials, public employee unions, educators, business leaders, and representatives of many special interest constituencies. Since it is in the nature of things that each group will seek to address its own special needs and see the problem in the light of its own concerns and constituencies, it is important, indeed imperative, that an objective framework is available which defines the context of the debate, establishes its objectives, and sets its limits.

It is the purpose of this study to provide that framework. It has a two-fold purpose: To examine the structure of the Massachusetts fiscal system, and; To examine the performance of the Massachusetts fiscal system.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.