The Impact of the Tax Revolt Era State Fiscal Caps

Abstract

The article presents a preliminary evaluation of the impact of state fiscal capitals in their first decade of operation, derived using a state-comparative interrupted time series design. While only two states followed California and adopted deep property tax cuts, the most common form of state fiscal limit was the fiscal capital, which was adopted by 19 states. The article uses a comparative interrupted time series design to evaluate the fiscal trends of three early adopters of fiscal capitals. Two of three capitals address local government indicating that their objective was not state government growth solely, but growth of the state-local complex. The adoption of fiscal capitals at the end of the last decade was accompanied by dire warnings by nearly everyone. Those opposed to capitals believed that if they worked the relative role of government would be sharply cut as capitals framed in nominal terms led to progressively greater cuts in real government spending. Results indicate that neither of these consequences obtained. The behavior of the capital state has been similar to that of noncapital states.