Community Composition and Voter Support for Tax Limitations: Evidence from Home-Rule Elections

Complaints about high taxes have stimulated taxpayer demands for explicit statutory or constitutional constraints on the taxing and spending powers of state and local governments. Although fiscal controls have long been a part of our system of government in the United States, the recent Tax Revolt movement commonly is thought to have its roots in the late 1970s with the approval of Proposition 13 in California. Voter discontent has produced a large number of new controls enacted during the last two decades. Why do voters need to impose explicit tax and expenditure constraints on the actions of their elected officials? A major objective of this paper is to evaluate, in a new setting, the rationale for the existence of tax limitations. Direct evidence regarding the determinants of voter support for fiscal limitations is sparse. Despite the persistent clamoring for additional fiscal controls, there have been few empirical studies that address the question of why voters desire tax-and-spend limits. Most of the existing studies were conducted over a decade ago. Citrin [6], Courant, Gramlich, and Rubinfeld [8], and Ladd and Wilson [23] examined micro-based survey data to identify factors that led taxpayers to support state-imposed limitations on local governments. Although these three studies analyzed survey responses about tax limitation efforts in different states, the common findings indicate that support for the constraints comes from individuals who want reduced taxes but prefer the existing level of spending. The responses suggest that limitation supporters either are seeking increased municipal efficiency or, as suggested by Courant et al., are suffering from free-lunch illusion.