Proposition 2 ½ is a Massachusetts law enacted in 1980 that strictly limits the amount of property tax revenue a municipality can raise through real and personal property taxes. This revenue is called the “tax levy.”
Prop 2 ½ limits how much the tax levy can be increased from year-to-year. The maximum amount a community can levy in any given year is called the “levy limit.”
Prop 2 ½ also caps the tax levy at 2.5% of the total full and fair cash value of all taxable real and personal property in Hingham. Because our tax levy is nowhere near this “levy ceiling,” the Town does not need to worry about this restriction.
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, and
- A dollar amount derived from the value of new construction and other growth in the local tax base since the previous year, called “new growth.”
The 2.5% increase and the new growth number are both added to the prior year’s levy limit to reach the current year’s levy limit.
A community can exceed its levy limit with voter approval. Prop 2 ½ gives communities flexibility to permanently increase the levy limit through overrides to support municipal and school operations.