What is Proposition 2 1/2?

Proposition 2 1/2 is a State law that places a ceiling on the total amount of taxes that a Town can raise; and it also limits the percentage by which a town’s tax revenues can increase from year to year. That is, it provides Towns with annual increases in total tax revenue of 2 1/2 percent apart from the additional tax revenue that can be raised because of the construction of new homes, additions and commercial buildings ("New Growth").  Proposition 2 1/2 has no relevance as far as tax increases on individual properties are concerned; it relates only to the total amount of taxes raised by the Town. That is, a variety of real estate market factors, such as property location and new construction, can affect the annual percent change in assessed value of individual properties. Consequently, there can be a wide variation in the percent change amounts of individual property assessments.