Local Sales Tax Earmarking and Transportation Outlay

31 Pages Posted: 2 Apr 2011

See all articles by Whitney Afonso

Whitney Afonso

University of North Carolina (UNC) at Chapel Hill - School of Government; University of Georgia - Department of Public Administration and Policy

Yilin Hou

Maxwell School, Syracuse University

Date Written: March 20, 2011

Abstract

This paper explores the fungibility between earmarked local option sales taxes and general revenue. We predict that as the adjustment costs to the budget grow, there will be less compensation from general revenue. We use national county level data from 1983 to 2004 to examine the effects of local option sales taxes earmarked for transportation (LOST-T). We find that counties with LOST-T spend more on transportation: a one percentage point increase in the LOST-T rate increases per capita transportation outlay by $40. This is an important result, shedding light on the impact of earmarked taxes which has been inconclusive in the literature.

Keywords: tax earmarks, local option sales taxes, transportation spending

JEL Classification: H71, H72, H76, R40 

Suggested Citation

Afonso, Whitney and Hou, Yilin, Local Sales Tax Earmarking and Transportation Outlay (March 20, 2011). Available at SSRN: https://ssrn.com/abstract=1791024 or http://dx.doi.org/10.2139/ssrn.1791024

Whitney Afonso (Contact Author)

University of North Carolina (UNC) at Chapel Hill - School of Government ( email )

NC
United States

University of Georgia - Department of Public Administration and Policy ( email )

Athens, GA 30602
United States

Yilin Hou

Maxwell School, Syracuse University ( email )

426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-3114 (Phone)

HOME PAGE: http://www.maxwell.syr.edu/pa/cpr/Hou,_Yilin/

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