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Oct. 4, 2011

Why it’s NOT a “2 percent tax cap”

The phrase “2 percent property tax cap” is misleading.

Although the new law has been referred to as a “2 percent tax cap,” it does not restrict any proposed tax levy increase to 2 percent, nor does it prohibit individuals’ property taxes from increasing more than 2 percent.

The law applies to the school district tax levy, not tax rates or the individual tax bill of residents. It doesn’t place any restrictions on how tax bills are calculated.

What the property tax cap legislation does is limit the amount the district can increase its tax levy while still only needing a simple majority vote to adopt. The “cap” actually provides the threshold number — the tax levy limit —that dictates whether a district needs a simple or super majority to pass the proposed budget.

The tax levy limit will be determined by each district according to an eight-step, complex formula dictated by the law, and will vary by district.

In addition, the formula for setting the tax levy limit allows for certain expenses — such as capital local expenditures, certain pension payments, and certain court orders/judgments — to be exempt from the cap. As a result, a district’s final tax levy after exemptions are calculated in could be greater than its published “tax levy limit” and yet still be considered, under the law, within that limit.

If the tax levy (before state-approved exemptions) is at or below the “tax levy limit,” a simple majority (more than 50 percent) is needed for budget approval. If the tax levy (before exemptions) exceeds a district’s “tax levy limit,” the support of a supermajority (60 percent or more) of voters is required for budget passage.

Voters will still decide on school district spending plans on the third Tuesday of May each year.

Tax bills will continue to be calculated by using a property’s assessed value (as determined by the local town assessor) and the tax rate — or the amount paid in taxes per $1,000 of assessed value. Tax rates are not solely determined by the tax levy approved by voters; they are often adjusted by the state using equalization rates, designed to equally distribute the tax burden across municipalities within a district. Tax bills can also be affected by STAR or other exemptions for which individual taxpayers may qualify.

As always, parents, staff, students and taxpayers are urged to voice their opinions on these matters to our elected leaders. Click here for elected leaders' contact information.

Return to the Tax Levy Limit Information page