Competition and Property Tax Limit Overrides

This paper looks at the role of spatial proximity of other town’s decision to hold an override vote on the decision of a Massachusetts town to hold an initial override vote under Proposition 2½. We find that if a neighboring town has already held a vote at some point in the past, your likelihood of holding an initial vote increases by 10-15 percent. A prior vote being successful has a strong impact, whereas losing votes are relatively ignored. The presence of spatial dependence remains when we look at the specific purpose of override vote, or at the total number of votes that have occurred between 1982 and 2010. We argue that this evidence points to a case where tax/yardstick competition is alive and well in Massachusetts, manifesting itself through the override vote, as opposed to the property tax rate.