Economics 139 Therese A. McCarty

Public Finance Winter 2000

Questions on article 4: Thomas Downes and David Figlio, "Do Tax and Expenditure Limits Provide a Free Lunch? Evidence on the Link Between Limits and Public Sector Service Quality." National Tax Journal, March 1999.

Note: I’d like to suggest a strategy for approaching this article. This is basically a literature survey. Rather than presenting new work, it summarizes many papers that provide evidence on the subject. I suggest that you start by reading the beginning and the end so you have a sense of what the article is about. Then I would answer the questions below that ask you to briefly summarize papers mentioned in the article. Downes and Figlio neatly summarize the findings of most of these papers in a sentence or two that should be pretty easy to find. This will give you a deeper understanding of what the paper is about. Then try reading the whole paper carefully. You will need the textbook to answer some questions. Chapter 21 will be most useful. Don’t forget to use the index and glossary. Finally, I want to assure you that I don’t expect you to remember the names of the authors of all the papers mentioned in the article.

  1. What is Proposition 13?
  2. Describe the conflicting predictions of the effects that Proposition 13 would have that were made when voters adopted it.
  3. What is the purpose of this paper?
  4. If we know that tax limits reduce expenditure per pupil, why doesn’t that necessarily allow us to conclude that there has been a decline in school quality?
  5. What are the non-financial ways in which tax limits can affect public sector output?
  6. What is Tiebout’s theory?
  7. What did surveys following Proposition 13 in California and Proposition 2 ½ in Massachusetts reveal about residents’ perceptions of their effects? Were these perceptions confirmed by objective measures of service quality?
  8. Why do Downes and Figlio say that Downes (1992) doesn’t show that Proposition 13 had no detrimental effect on California schools?
  9. Briefly describe Serrano v. Priest.
  10. What does Table 1 show?
  11. Briefly describe the finding and shortcomings of Figlio (1997), Downes, Dye and McGuire (1998), Downes and Figlio (1998), and Bradbury, Case, and Mayer (1998).
  12. Briefly describe Hanushek’s position regarding the relationship between expenditure per pupil and student achievement. Is this view confirmed by all studies on the subject?
  13. How can we explain the finding that more spending doesn’t increase achievement? What is meant by the terms "rents" and "rent-seeking?"
  14. Why might achievement fall when spending falls even though it doesn’t rise as spending rises?
  15. Briefly summarize the findings of Figlio (1997), Figlio (1998), Cutler, Elmendorf and Zeckhauser (forthcoming) and Dye and McGuire (1998).
  16. How do the authors explain the finding that Illinois school districts did not cut expenditure on instruction relative to administration in response to tax limits?
  17. Briefly describe the results of Figlio and Rueben (1998) and Goldhaber and Brewer (1997).
  18. According to Downes and Figlio, has "the central desire of supporters of property tax limitations, reductions in taxes with no appreciable reductions in student outcomes" been achieved.
  19. Look up "Leviathan" in the dictionary if you don’t know what it means. What does it mean in the context in which it is used in this article?
  20. What three questions must be answered to determine the costs and benefits of a tax limit? Which of these questions involve costs and which involve benefits of a tax limit?
  21. Briefly summarize the findings of McGuire (1999) and Galles and Sexton (1998).
  22. Briefly summarize the findings of Greiner and Peterson (1986) and Cutler, Elmendorf Zeckhauser (forthcoming).
  23. Briefly summarize the work of Loury and Garman (1995).
  24. Why do Downes and Figlio say that "one less tangible cost of tax limits is that of increased centralization of education?"
  25. Do Downes and Figlio conclude that tax limits are "bad public policy?" Would you be inclined to support a tax limit if you had an opportunity to vote for one? Why or why not?