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Impact of State-Level Tax and Expenditure Limits (TELs) on Government Revenues and Aid to Local Governments

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  • Sharon N. Kioko
  • Christine R. Martell

Abstract

This article investigates the impact of state-level tax and expenditure limits (TELs) on state government revenues and aid to local governments. Using an instrumental variable approach to control for endogeneity, the authors find that the general fund TELs (i.e., revenue and expenditure limits) have led to substantial increases in tax and nontax revenues. States with procedural limits (i.e., those with voter approval and/or legislative supermajority requirements votes) have significantly lower tax revenues. For states with these procedural limits, their ability to impose new or higher taxes is limited by the rules for passing such legislation. This study also finds that states with general fund TELs have higher levels of aid to local governments, while those with procedural TELs have lower levels of aid. Local government property tax limits do not have any impact on taxing authority of states and have only marginal impacts on the state-aid programs.

Suggested Citation

  • Sharon N. Kioko & Christine R. Martell, 2012. "Impact of State-Level Tax and Expenditure Limits (TELs) on Government Revenues and Aid to Local Governments," Public Finance Review, , vol. 40(6), pages 736-766, November.
    • Handle: RePEc:sae:pubfin:v:40:y:2012:i:6:p:736-766
    DOI: 10.1177/1091142112438460
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    Cited by:

    1. Benedict S. Jimenez, 2017. "Institutional Constraints, Rule-Following, and Circumvention: Tax and Expenditure Limits and the Choice of Fiscal Tools During a Budget Crisis," Public Budgeting & Finance, Wiley Blackwell, vol. 37(2), pages 5-34, June.
    2. Justin M. Ross & Madeline Farrell & Lang Kate Yang, 2015. "Indiana's Property Tax Caps: Old Idea, New Approach, and Surprising Incentives," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 18-41, December.
    3. Phuong Nguyen-Hoang, 2015. "Volatile earmarked revenues and state highway expenditures in the United States," Transportation, Springer, vol. 42(2), pages 237-256, March.
    4. Tima T. Moldogaziev & Tatyana Guzman, 2015. "Economic Crises, Economic Structure, and State Credit Quality Through-the-Cycle," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 42-67, December.

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