Key Findings
- Along with having one of many highest high revenue taxA tax is a compulsory fee or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of basic authorities providers, items, and actions. charges within the nation, Massachusetts has the nation’s 6th highest property taxA property tax is primarily levied on immovable property like land and buildings, in addition to on tangible private property that’s movable, like automobiles and gear. Property taxes are the only largest supply of state and native income within the U.S. and assist fund faculties, roads, police, and different providers. collections per capita and the tenth highest property taxes as a proportion of private revenue.
- State support to cities and cities is on the decline, whereas Massachusetts’s state income collections are presently surpassing established benchmarks.
- Levy limits are typically probably the most structurally sound treatment; they’re efficient at curbing rising tax payments and are much less distortionary as they permit particular person property values to fluctuate with market exercise.
- Proposition 2 ½, which imposes a restrict on the quantity of native income a neighborhood can levy, was handed by Massachusetts voters in 1980 in response to quickly rising property tax payments.
- With Proposition 2 ½, property taxes in Massachusetts are nonetheless excessive, however with out it, property tax payments would have risen considerably greater than they have already got up to now 40 years.
Mayor Michelle Wu (D) of Boston, Massachusetts, just lately referred to as for the repeal of Proposition 2 ½, a property tax limitation that has been in place because the early Nineteen Eighties.[1] The levy cap has helped gradual property tax development, protecting property tax burdens in test in a high-tax state. Lawmakers needs to be cautious of opening the door to modifications to Proposition 2 ½, which might create giant, sustained property tax will increase for Massachusetts house owners and renters.
What Is Proposition 2 ½?
Proposition 2 ½ was handed by Massachusetts voters in 1980 in response to citizen outcry to escalating property taxes. Proposition 2 ½ establishes two varieties of levy limits:
- The legislation imposes a ceiling on the complete property tax income that municipalities can increase, which is capped at 2.5 p.c of the assessed worth of all taxable property inside the municipality.
- The legislation moreover imposes a levy restrict, limiting the quantity the levy can enhance from yr to yr. The levy restrict will all the time be beneath or equal to the levy ceiling. The levy restrict for a municipality is predicated on the earlier yr’s levy restrict, not the earlier yr’s precise levy. The brand new levy restrict turns into the bottom for the subsequent yr’s restrict. Annually, the property tax levy can solely enhance by 2.5 p.c, not counting new building.
Massachusetts Is a Excessive-Tax State
Even with Proposition 2 ½, Massachusetts property taxes are nonetheless excessive. Massachusetts has the nation’s 6th highest property tax collections per capita and the tenth highest property taxes as a proportion of private revenue.[2] Proposition 2 ½ has not hamstrung native governments. It has merely saved already-high property taxes from trending considerably larger.
Property taxes are just one purpose Massachusetts is a high-tax state. Northeastern states are likely to have larger particular person revenue taxA person revenue tax (or private revenue tax) is levied on the wages, salaries, investments, or different types of revenue a person or family earns. The U.S. imposes a progressive revenue tax the place charges enhance with revenue. The Federal Revenue Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years outdated, particular person revenue taxes are the biggest supply charges than a lot of the nation, and Massachusetts’s comparatively new high particular person revenue tax price of 9 p.c surpasses most of its neighbors, together with Connecticut (6.99 p.c), Rhode Island (5.99 p.c), Vermont (8.75 p.c), and New Hampshire, which boasts no revenue tax in any respect. Solely New York levies the next price at 10.9 p.c.[3]
In fiscal yr 2022 (which ended June 30, 2022), Massachusetts had the 6th highest state and native tax collections per capita at $9,341.[4] Collections have subsequently elevated nonetheless additional with the passage of an revenue surtaxA surtax is an extra tax levied on high of an already present enterprise or particular person tax and might have a flat or progressive price construction. Surtaxes are sometimes enacted to fund a selected program or initiative, whereas income from broader-based taxes, like the person revenue tax, sometimes cowl a large number of packages and providers. in November of 2022.[5] An August 2025 Massachusetts Division of Income report famous that state income collections for fiscal yr 2025 have been up 7.1 p.c from fiscal yr 2024, exceeding its annual income benchmark by 5.1 p.c.[6] The will increase have been pushed by the revenue surtax accredited by voters in 2022, capital positive factors taxA capital positive factors tax is levied on the revenue created from promoting an asset and is commonly along with company revenue taxes, steadily leading to double taxation. These taxes create a bias in opposition to saving, resulting in a decrease stage of nationwide revenue by encouraging current consumption over funding. collections, gross sales and use taxes, and “all different” miscellaneous taxes. Massachusetts residents face excessive tax burdens at each the native stage (predominantly by property taxes) and state stage (by many taxes, however particularly the revenue tax).
A Excellent Storm
Even with the adoption of a 9 p.c high revenue tax price, Massachusetts’s state support to native governments is on the decline.
As with localities in most states, cities and cities in Massachusetts can’t impose native revenue taxes and have restricted native gross sales taxA gross sales tax is levied on retail gross sales of products and providers and, ideally, ought to apply to all remaining consumption with few exemptions. Many governments exempt items like groceries; base broadening, reminiscent of together with groceries, might maintain charges decrease. A gross sales tax ought to exempt business-to-business transactions which, when taxed, trigger tax pyramiding. authority. This places a heavy reliance on property taxes and state support.
Utilizing information from the US Census Bureau, a Massachusetts Municipal Affiliation October 2025 report signifies that, nationwide, cities and cities get about 31 p.c of their income from state support, whereas Massachusetts localities obtain 26 p.c presently.[7] General, Massachusetts’s state support, significantly unrestricted funds, has declined by 25 p.c since 2010, with rural municipalities seeing the largest decreases. On condition that Massachusetts’s income collections have surpassed established benchmarks, declines in state support are usually not a consequence of a scarcity of collections and ensuing fiscal constraint, however quite a mirrored image of state funds priorities.
Wages, pensions, and well being advantages for these working in Okay-12 training and public security comprise nearly all of native authorities spending, and Mayor Wu included a 4.45 p.c compensation enhance over fiscal yr 2025 in her fiscal yr 2026 funds advice. Pension funds and the price of a collective bargaining settlement with the Boston Lecturers Union have been key drivers of elevated expenditures.[8]
Evaluation Limits and Price Limits
Frequent strategies of imposing limitations on property taxes embody evaluation limits, price limits, and levy limits.
Evaluation limits mandate that the annual enhance in a property’s valuation can’t exceed a given proportion yearly, offering a way of predictability when it comes to future property tax burdens, significantly when incomes don’t maintain tempo with rising property values. They profit present property house owners and are sometimes seen as a approach to make sure that these on fastened incomes are usually not priced out of their houses as property values rise.
Whereas evaluation limits sound interesting, they ship extremely unequal outcomes. By favoring long-term property house owners, the property tax burden is shifted onto new property house owners, usually placing property possession out of attain for first-time patrons, these with extra modest incomes, and people needing to relocate. Moreover, evaluation limits can create “lock-in results,” disincentivizing up-sizing for rising households in addition to down-sizing for empty-nesters and older adults.
Price limits both cap the allowable millage price or limit the quantity by which the millage price might be raised in a given yr. Millage charges are sometimes expressed as the quantity of taxation per $1,000 of property worth. Price limits are a extra impartial technique of taxation since they’re utilized equally to all taxable property. If a taxing jurisdiction needs to impose a tax price that exceeds the restrict, it could actually search voter approval to take action, however adjusting evaluation ratios and eliminating property tax exemptions have additionally been exercised as alternate options.
Sadly, price limits fail to guard property house owners from rising property tax burdens when property values rise considerably, as has been the case lately.
Why Are Levy Limits the Most well-liked Property Tax Limitation?
In contrast to evaluation limits that create important market distortions and price limits that will nonetheless lead to important will increase in complete property tax income collected, levy limits constrain the whole quantity of property tax income collected by a taxing jurisdiction. That is sometimes achieved by automated price rollbacks, the place complete property tax income collections within the present tax yr are usually not allowed to exceed the earlier yr’s complete property tax income collections above a given quantity.
Some levy limits impose a fixed-percentage income development cap, some tie the limitation on income development to the speed of inflationInflation is when the final worth of products and providers will increase throughout the financial system, decreasing the buying energy of a forex and the worth of sure belongings. The identical paycheck covers much less items, providers, and payments. It is usually known as a “hidden tax,” because it leaves taxpayers much less well-off resulting from larger prices and “bracket creep,” whereas growing the federal government’s spendin, and a few might use a mixture of the 2.
To accommodate rising communities, new building is sort of all the time exempted. Protecting this new development out of a levy restrict is sensible. The relative worth of property is an efficient approach of approximating the advantage of authorities providers obtained, however the appreciation of a property’s worth doesn’t instantly make the providers extra pricey to supply. Nonetheless, it’s affordable to anticipate new prices to be incurred when there’s new building, significantly when that building means extra residents or companies finding inside a neighborhood, growing the demand for providers like public security and training.
As its widespread title implies, Proposition 2 ½ limits development to 2.5 p.c per yr, although it permits communities to exceed the boundaries by an override. For an override to be positioned on the poll, a majority of the governing physique should vote to take action. An override passes if a majority of residents approve it. If accredited, the levy restrict for the yr is calculated by together with the quantity of the override. The override ends in a everlasting enhance within the levy restrict of a neighborhood, setting a brand new baseline from which extra annual will increase of two.5 p.c are permitted.
Proposition 2 ½’s levy restrict can enhance from yr to yr through an automated 2.5 p.c enhance, new development, or an override. This new, elevated levy restrict quantity then turns into the bottom upon which levy limits are calculated for future years.
Not all taxpayers are essentially shielded from tax will increase underneath levy limits. Policymakers stay free to regulate charges inside the total income cap except moreover constrained by a price restrict. If some properties respect in worth considerably whereas different properties don’t, then the house owners of the properties experiencing the larger appreciation in property worth might expertise bigger tax will increase in consequence. However as a result of they impose a constraint on the expansion of property taxes as an mixture, levy limits keep away from selecting winners and losers.
Levy limits are typically probably the most structurally sound choice and are efficient at curbing rising tax payments, significantly when escalations in housing values are prevalent. Levy limits are much less distortionary as they permit particular person property values to fluctuate with market exercise.
And levy limits have labored for Massachusetts. They haven’t sidelined cities and cities, which nonetheless impose excessive property taxes. However they maintain excessive taxes from remodeling into the kind of sky-high taxes which can be more and more fueling property tax revolts elsewhere. Moreover, if native officers really feel unnecessarily constrained by the boundaries of Proposition 2 ½, they needn’t ask voters to get rid of the measure; they merely must go to voters to authorize an area override.
Notably, almost 200 of Massachusetts’s 351 cities and cities haven’t pursued overrides within the final 15 years.[9] Over time, overrides sought have steadily decreased. In accordance with the Massachusetts Taxpayers Basis, within the Nineteen Nineties, cities and cities averaged 277 overrides per yr; within the 2000s, overrides averaged 118 per yr; and within the 2010s, the variety of overrides continued to say no to 41 per yr on common.[10] A subsequent report famous a slight enhance of 70 overrides in 2020, however in 2021 and 2022, overrides have been right down to 40 in every of these years.[11]
Choices to not pursue overrides are influenced by the prices related to elections, the time required for public outreach, and the uncertainty of end result given the funding of time and money. However largely they’re pushed by a decision-making calculus for native officers: will the voters consider that this property tax enhance is justified? If Mayor Wu and a few lawmakers in Boston get their approach, voters will solely be requested their enter one final time, on a measure abolishing Proposition 2 ½. That is the flawed method. Lawmakers would do higher to embrace the successes of the measure, which have allowed property tax collections to rise, however with out the big, unlegislated tax will increase which have triggered a lot unrest elsewhere. The place they genuinely consider there’s a powerful case to be made for producing extra income, they’ll make that case on to voters, quite than asking voters to grant a once-and-for-all authorization for native officers to boost property taxes at will.
Massachusetts Property Tax Collections Beneath Proposition 2 ½
When initially applied, Proposition 2 ½ sharply lowered property tax collections by imposing new price limits, with collections bottoming out in 1984. Since then, nevertheless, its constraint on the annual income will increase on present property (exempting new property from the expansion cap) has allowed regular upward development in actual phrases, from $10.97 billion in 1984 to $21.17 billion in 2023, adjusting for each inflation and inhabitants development. (Nominal 1984 collections have been $3.09 billion.) Even with the levy restrict, property tax burdens have virtually doubled over the previous 4 a long time, and Massachusetts’ burdens stay among the highest within the nation. With out it, they’d have risen far sooner nonetheless.
We’ve Been Right here Earlier than
Whereas present critics of Proposition 2 ½ wish to see full repeal, issues in regards to the constraints imposed by the measure have been round for many years. In 1990, simply 10 years after the passage of Proposition 2 ½, Governor Dukakis (D) assembled a panel of presidency and enterprise leaders and tasked them with structuring the financing of native authorities by the 2 largest native income streams—property taxes and state support to native governments—in a approach that was predictable, reliable, and attentive to financial actuality.
Whereas the duty power really useful modifications regarding Proposition 2 ½, it reported its agency help for the measure, writing,
The self-discipline that Proposition 2 ½ imposed on the property tax . . . is a vital factor of the native tax construction. As a tax on shelter, property taxes ought to proceed to be constrained and the decline in burden attributable to the two ½ restrict protected. Each the ceiling on the tax price and an annual restrict on tax will increase needs to be retained.[12]
The report’s key advice was to index the annual levy restrict enhance to inflation, permitting native governments to be extra attentive to modifications in financial circumstances during times of excessive inflation, whereas retaining the two.5 p.c restrict for occasions when inflation is low.
A case can nonetheless be made for permitting the larger of two.5 p.c or inflation, nevertheless it’s necessary to notice that much more than 4 a long time into slowing the speed of development, the measure nonetheless permits Massachusetts to have among the highest property taxes within the nation.
Property taxes have risen considerably over the previous 40 years, however with out Proposition 2 ½, Massachusetts property tax payments would solely be extra burdensome than they already are. Massachusetts is a high-tax state, and property house owners and renters in Massachusetts are lucky to have its safety.
Keep knowledgeable on the tax insurance policies impacting you.
Subscribe to get insights from our trusted consultants delivered straight to your inbox.
References
[1] John L. Micek, “‘Cash seize’: GOP slams Boston Mayor Wu’s suggestion of 2nd have a look at legislation limiting native tax hikes,” Mass Stay, Sep. 23, 2025, https://www.masslive.com/politics/2025/09/money-grab-gop-slams-boston-mayor-wus-suggestion-to-tweak-law-limiting-property-tax-hikes.html.
[2] Janelle Fritts, Jared Walczak, Abir Mandal, and Katherine Loughead, 2026 State Tax Competitiveness Index, Tax Basis, Oct. 30, 2025, https://taxfoundation.org/statetaxindex/.
[3] Andrey Yushkov and Katherine Loughead, “State Particular person Revenue Tax Charges and Brackets, 2025,” Tax Basis, https://taxfoundation.org/information/all/state/state-income-tax-rates/.
[4] Tax Basis, Details & Figures 2025: How Does Your State Evaluate?, Mar. 25, 2025, https://taxfoundation.org/information/all/state/2025-state-tax-data/.
[5] Govt Workplace for Administration and Finance, FY24 Funds Transient 03: Honest Share Investments in Schooling and Transportation, Commonwealth of Massachusetts, 2023, https://funds.digital.mass.gov/govbudget/fy24/budbriefpdf/fy24_bb03_fair_share_investments_in_education_transportation.pdf.
[6] Massachusetts Division of Income, “Fiscal Yr 2025 Income Collections Totaled $43.708 Billion,” Aug. 8, 2025, https://www.mass.gov/information/fiscal-year-2025-revenue-collections-totaled-43708-billion.
[7] Massachusetts Municipal Affiliation, A Excellent Storm: Cities and Cities Face Historic Fiscal Pressures, October 2025, https://www.mma.org/wp-content/uploads/2025/10/MMA-APerfectStorm-HistoricFiscalPressures-report-10.9.25.pdf.
[8] Boston Municipal Analysis Bureau, “Mayor Recommends 4.45% Improve for FY26,” Apr. 23, 2025, https://www.bmrb.org/mayor-recommends-4-45-budget-increase-for-fy26/; Boston Municipal Analysis Bureau, “Boston Public Faculties Reaches Tentative Settlement with Boston Lecturers Union on New Contract,” Apr. 11, 2025, https://www.bmrb.org/boston-public-schools-reaches-tentative-agreement-with-boston-teachers-union-on-new-contract/.
[9] Massachusetts Municipal Affiliation, A Excellent Storm: Cities and Cities Face Historic Fiscal Pressures, October 2025.
[10] Massachusetts Taxpayers Basis, Municipal Monetary Information, 49th Version, January 2020, https://thankful-fountain-e21.notion.website/Footnotes-43f06758acea4cfc904964eb7c43270b.
[11] Massachusetts Taxpayers Basis, Municipal Monetary Information, 50th Version, April 2023, https://www.masstaxpayers.org/websites/default/recordsdata/publications/2023-05/MTFpercent202022percent20MFDpercent20Report.pdf.
[12] Massachusetts Division of Income Division of Native Providers, “Report on the Governor’s Activity Drive on Native Finance,” Metropolis & City 3:8 (April 1990), https://archives.lib.state.ma.us/server/api/core/bitstreams/8c8a26cd-5c65-4da2-9995-9630fdcc33a3/content material.
Share this text
