Local Option Sales Taxes as a Tool to Reduce Property Taxes: An Examination of LOSTs and their Effect on Property Tax Burdens and Own Source Revenue

Posted: 4 Mar 2013 Last revised: 18 Jun 2013

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

Date Written: March 4, 2013

Abstract

The relationship between local option sales taxes (LOSTs) and property taxes and own source revenue is not well understood in the literature. This may be in part due to the aggregated nature of the data which fails to capture different motivations for adoption of LOSTs (Sjoquist, Walker, and Wallace 2005). Using county level data from thirty-five states, I find that LOSTs reduce property tax burden and increase own source revenue in some circumstances. When aggregating the data, my results are consistent with previous studies (Jung 2001; Sjoquist, Walker, and Wallace 2005). The primary contribution of the research presented is that I distinguish between two types of counties that use their LOST revenue differently. The first type of county uses LOST revenue to both reduce property tax burden and increase own source revenue, whereas the second type of counties use LOST revenue exclusively to increase their own source revenue. This research is the first step in bridging the LOST literature with the tax mix choice literature.

Keywords: local sales taxes, property taxes, own source revenue

JEL Classification: H20, H71, H83

Suggested Citation

Afonso, Whitney, Local Option Sales Taxes as a Tool to Reduce Property Taxes: An Examination of LOSTs and their Effect on Property Tax Burdens and Own Source Revenue (March 4, 2013). Available at SSRN: https://ssrn.com/abstract=2228236 or http://dx.doi.org/10.2139/ssrn.2228236

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

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