Proposition 2.5

Proposition 2½ was a ballot initiative passed by Massachusetts voters in 1980 to limit property tax increases. The initiative became law and came into force in 1982. The name refers to the 2.5% annual limit on the increase of real estate taxes. It is similar to other tax revolt measures passed around the same time in other parts of the United States.

Related Topics:
Ballot initiative - Massachusetts - 1980 - Property tax - 1982 - Tax revolt - United States

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There are fundamentally two components of Proposition 2½:

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• The total annual property tax revenue raised by a municipality can never exceed 2.5% of the total cash value of all taxable property contained in it. (a ceiling)
• The annual increase of property tax cannot exceed 2.5%. There are exceptions for new growth, and "overrides" approved by voters, however.

Note that these limits refer to the entire amount of the annual tax levy raised by a municipality. Although in practice it does limit the tax bills of individual taxpayers, this is an indirect result.

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Under Proposition 2½, real estate taxes can rise only under the following circumstances:

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• Automatic - An annual increase of up to 2.5% is "automatic" up to the total 2.5% ceiling.
• New construction - New construction and newly-taxable parcels are not subject to either limit.
• Override - A simple majority of voters can approve a temporary or permanent override to increase the annual tax increase beyond 2.5%, though this cannot breach the "ceiling".
• Exclusion - Bonds and other municipal debt can be excluded from the increase calculation if a majority of voters pass an exclusion measure.