Tax and Expenditure Limits

tax and expenditure limits
click on the map for more information


 Appraisal Caps  Revenue Caps [TABOR]
Debt Limit Spending Limit


The first years of the 21st century have brought renewed interest in the structure and effectiveness of tax and expenditure limitations (TELs). These fiscal mechanisms are designed to provide certain strictures to restrain the growth of governmental budgets either on the tax side or the spending side or on both. This paper reviews the use of state TELs and explores the policy issues associated with fiscal limits.

As of April 2010, 30 states operate under a tax or expenditure limitation. Ohio is the most recent state to impose one. In their 2006 session, legislators crafted a statutory spending limit based on population plus inflation growth or 3.5 percent, whichever is greater. This is the second enactment of a TEL in several years. Maine enacted a spending limit in 2005.  Several states, like Maine and now Ohio, have statutory spending or tax limit mechanisms, while others, such as Colorado, have TELs embedded in their state constitutions. Colorado is commonly viewed as having the most restrictive set of fiscal limits, and will be further explored in this report.

23 states having spending limits, 4 have tax limits, and 3 have both. About half are constitutional provisions and the other half are statutory. Many of the existing TELs were enacted in two periods of time—the late 1970s and early 1990s. These periods coincided with economic fluctuations in the United States and began shortly after the property tax revolt in California that resulted in passage of Proposition 13.
NCSL – State Tax and Expenditure Limits —2010