| Although several tax and expenditure limits (or TELs) were passed before California’s Peoples Initiative to Limit Property Taxation (the Jarvis–Gann Amendment Article XIII A; commonly referred to as Proposition 13), it is generally acknowledged that Proposition 13 began the modern tax revolt. Support for measures like Proposition 13 grew in response to a growing antitax sentiment that began in the mid-1970s. To date, virtually every state has placed a limit on their local government’s ability to impose new or higher taxes (Mullins and Wallin 2004; Anderson 2006). TEL measures continue to be popular to this day. For instance, Indiana amended its TEL measure in 2010 following a series of court ordered and statutorily mandated reassessments (Thaiprasert, Faulk, and Hicks 2010). In 2012, Governor Cuomo of New York signed a law that set growth of property tax revenues at the rate of inflation or 2 percent, whichever was less. While the existing literature has extensively explored TEL impact on taxing and spending authority of local governments, scholars have yet to explore TEL impact on local government use of tax-supported debt. The relationship between TELs and local government use of tax-supported debt warrants consideration as TELs are limits on the property tax base and related revenues—two essential components used to determine a local government’s legal authority to issue and finance tax-supported debt. Theoretically, TELs could have a negative impact on a government’s capacity to issue tax-supported debt as the amount of general tax dollars and/or the taxable base would be subject to TEL provisions. This hypothesis is supported with data from the Census Bureau that shows a precipitous decline in use of tax-supported debt following the adoption of TELs (figure 1).1 However, when these rules constrain a government’s taxing or spending authority, public officials could substitute current period payas-you-go (or pay-go) capital spending with long-term debt (or pay-as-youuse). In this instance, the government would report a lower tax burden but a higher debt burden (Bahl and Duncombe 1993; Clingermayer and Wood 1995). These causal mechanisms have neither been conceptually differentiated nor empirically tested in this literature. |