Doesn’t Proposition 2½ limit the increase?

No, Proposition 2½ does not limit individual tax bills from increasing more than 2.5%.  One of the most common misunderstandings about Proposition 2½ is thinking it limits the amount individual property taxes can go up.  Instead, it limits the total amount of property taxes which a city or town can raise each year.

It’s not surprising that many people don’t understand Proposition 2½.  It became a law after it was approved by a 56% “Yes” to 40% “No” margin in the November, 1980 statewide election.  It was placed on that ballot as Question 2 through a citizens’ initiative petition.  That election was 44 years ago, which means the youngest person who could have voted on that question is now 62 years old.

Technically known as Massachusetts General Laws Chapter 59, Section 21C, Proposition 2 ½ limits property taxes in two ways.

First, a community cannot levy more than 2.5% of the total full cash value of all taxable property in the community (called the “levy ceiling”).  Holliston’s total valuation for the current Fiscal Year 2024 is $3,732,307,930 and 2.5% of that is $93,307,698. The town is more than $35 million below that ceiling.

Second, a community’s allowable tax levy for a fiscal year (called the “levy limit”) cannot increase by more than 2.5% of the maximum allowable limit for the prior year, plus certain allowable increases such as “new growth” being added to the tax rolls.  Holliston’s Fiscal Year 2023 levy limit was $54,528,945 and its Fiscal Year 2024 levy limit is $55,868,973 – a 2.46% increase.

The law also established two types of voter-approved methods to increase that levy limit: overrides and debt exclusions.  Both require a Town Meeting vote and a ballot vote to be passed.

A levy limit override increases the amount of property tax revenue a community may raise by the amount specified in the override question.  The result is a permanent increase in the amount of taxes the municipality can raise.

A debt exclusion increases the amount of property tax revenue a community may raise for whatever length of time it takes to repay borrowing money for a specific project or projects.  Unlike an override, a debt exclusion is not permanent, does not increase the community’s levy limit and does become part of the base for calculating future years’ levy limits.

The Massachusetts Department of Revenue has a series of YouTube videos and several brochures available about Proposition 2½ that can be accessed by going to: https://www.mass.gov/info-details/proposition-2-12-and-tax-rate-process.