Proposition 2 1/2 FAQ's
Why did my tax bill go up 10% and the total tax levy only went up 5% from last year?
The tax levy and proposition 2 1/2 are not parcel-specific. Some properties will always bear more of the allowed annual increases (previous year's tax levy + 2 1/2% + new growth + overrides) than other properties. Within the Town, certain neighborhoods and types of homes appreciate in value at a faster pace than others. Even in a declining market, certain properties will appreciate or maintain their value.
Does Proposition 2 1/2 mean that my annual property taxes cannot increase more than 2 1/2%?
No. Proposition 2 1/2 sets a limit on the entire tax levy for the Town. While there is a limit to the overall increase in property taxes, the revaluation program may result in increases or decreases in property taxes. Proposition 2 1/2 establishes a limit on the revenue a municipality can raise from property taxes. Proposition 2 1/2 does not limit the amount by which an individual tax bill may change from year to year.
How does Proposition 2 1/2 limit taxes?
Proposition 2 ½ contains two limitations on the amount of property taxes a town can raise: Tax Levy Limit and Tax Levy Ceiling
Levy Limit: The maximum amount a community can levy (in total) in any given year. It does not apply to an individual tax bill. Under Proposition 2 ½, a community’s Levy Limit increases automatically by two factors:
- An incremental increase of 2.5% of the prior year’s levy limit
- A dollar amount derived from the value of new construction and other growth in the local tax base since the previous year (New Growth).
A community can also assess additional taxes to pay the debt service (principal and interest costs) for a specific capital project (New School). This additional amount (Debt Exclusion) is added to the Levy Limit for the life of the debt. The combined total is referred to as the Maximum Allowable Levy.
Levy Ceiling: 2 1/2% of the full cash value of all taxable property in the city or town. The Tax Levy can NEVER go above this amount
What is the relationship of property values and the tax rate?
Proposition 2 1/2 sets the maximum amount of property taxes (or the levy) that a town can raise. Once the amount to be raised is determined, a tax rate is calculated by dividing the amount to be raised (tax levy) by the total valuation of the town. Whether the tax rate for a community will increase or decrease from the prior year will depend on the change in the tax levy voted by the community and the change in property values.