Question

Suppose a state is considering three different types of fiscal limits for local governments in the state--a maximum property tax rate, a limit that property tax revenue may not increase more than population and inflation rate together, or a limit that spending may not increase more than five percent. In each case, the limit may be exceeded by majority vote. Which limit is most restrictive and why? Contrast the three in terms of the sources of allowed increases in taxes or spending and the potential effect on local services.

Answer 1

The most restrictive measure seems to be the limit on expanding that it may not increase more than 5%. This is so because property tends to vary with person to person and also the population growth rate and the rate of inflation is also a variable. Any change in these variables is unforeseen and therefore the rules have to be mended accordingly and is necessarily to be made. But changes in the limit spending has to be applied at a constant rate and will be regulated under fair means by all.

Sources of allowed increase in taxes or spendings may be the high demand of property due to increased income or some other factors,source of property tax revenue is the increased number of exchange of property in the market. All these measures contrast in terms of the factors responsible for their demand and supply.