Are Tax and Expenditure Limits (TELs) Effective in Constraining Government Budgets? A Meta-Analysis

Abstract

Tax and expenditure limits (TELs) are an important fiscal institution for policymakers to restrain government taxing and spending. However, traditional theories have proposed different hypotheses about the effectiveness of TELs, and empirical studies have not been able to reach a consistent conclusion. In this article, we employ a meta-analysis to synthesize existing empirical evidence and explore why different studies find different results on the effect of TELs on state and local budgets. Our meta-analysis results show that TELs are associated with small but significant decreases in both state and local revenue and expenditure. The findings from a subsequent meta-regression analysis add to the TEL literature by showing that the design features of TELs, types of revenue, and level of government can all contribute to the observed variations in the effect of TELs on state and local budgets. The conclusion of this study sheds light on the long-standing debate over the impact of TELs and suggests useful ways for policymakers to improve their TEL designs and policies.

Keywords:

• Tax and expenditure limits (TELs)
• budget
• state
• local
• meta-analysis

Acknowledgements

We thank four anonymous reviewers for their helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Detailed information on the Bayesian results are available upon request.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China, 2021, Grant ID: 72174215, and the Major Program of Key Research Base of Social Science and Humanities, Ministry of Education of China, 2022, Grant ID: 22JJD630022.

Notes on contributors

Zhen Guan

Zhen Guan is a lecturer at the School of Public Administration, Zhongnan University of Economics and Law, China. Her research interests are public budgeting and finance, local governance, intergovernmental relations and government transparency.

Jun Peng

Jun Peng is a professor at the School of Government and Public Policy, University of Arizona. His research focuses on state and local government financial management in the U.S., such as budgeting, debt management and pension management.

Qiushi Wang

Qiushi Wang is a professor at the Center for Chinese Public Administration Research and School of Government, Sun Yat-sen University, China. His research interests include public budgeting and finance, and public management.