Tag Archives: expenditure

What happens when policymakers limit increases in property taxes?

Yarram et alSubba Reddy Yarram, Brian Dollery and Carolyn Tran

In our recent article in Policy & Politics,  we examine the impact of a ‘cap’ on property taxes in the local government system of the Australian state of Victoria. ‘Fair Go rate capping’ was introduced in Victoria from 1 July 2016. Prior to this, general rates charged by local councils in Victoria had grown by an annual average of 6% over a 10 year period. Under the Fair Go policy, the Minister for Local Government sets a maximum permissible rate increase on the advice of the Victorian Essential Services Commission. The actual rates cap was set at 2% for 2016-17 and 2.5% for 2017-18 based on the forecast Consumer Price Index.

In principle, the rate caps limit the ability of local councils to raise revenue required to fund their ongoing operations, often in the hope that this will stimulate increased operational efficiency. In our article, we empirically investigated two main questions: What were the short-term impacts of the Fair Go rate capping on different types of municipal expenditure? Did Fair Go rate capping have a differential impact on the different categories of Victorian local councils? Analysis of these questions can shed light how best to frame local government policy tailored to accommodate different categories of local council facing different expenditure constraints. Continue reading What happens when policymakers limit increases in property taxes?