Implications of the Coronavirus on Sales Tax Revenue and Local Government Fiscal Health

Journal of Public and Nonprofit Affairs, Forthcoming

41 Pages Posted: 10 Apr 2020 Last revised: 17 Aug 2020

See all articles by Bruce McDonald

Bruce McDonald

North Carolina State University

Sarah Larson

University of Central Florida

Date Written: July 22, 2020

Abstract

The outbreak of the coronavirus pandemic has raised a considerable alarm about issues of public health and safety. The response to the outbreak, however, has also brought concern regarding its impact on local governments in the United States. Local governments have been a primary respondent in the fight after the COVID-19 disease, but the response has also reduced income from a key source of revenue: sales tax. Using North Carolina counties as a case study, we explore the shock to sales and use tax revenue faced by local governments from COVID-19 and estimate its impact on county fiscal health. Our results show that while many local governments were financially struggling before the outbreak, the drop in sales tax revenue severely threatens both their ability to continue to respond to the virus and their ability to remain solvent.

Keywords: COVID-19; Sales Tax; Fiscal Health; County Government

JEL Classification: H12; H71; I18

Suggested Citation

McDonald, Bruce and Larson, Sarah, Implications of the Coronavirus on Sales Tax Revenue and Local Government Fiscal Health (July 22, 2020). Journal of Public and Nonprofit Affairs, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3571827 or http://dx.doi.org/10.2139/ssrn.3571827

Bruce McDonald (Contact Author)

North Carolina State University ( email )

School of Public and International Affairs
Campus Box 8102
Raleigh, NC 27695
United States
919-515-2481 (Phone)

HOME PAGE: http://www.brucemcdonald.com

Sarah Larson

University of Central Florida ( email )

4364 Scorpius Street
HPA II, Room 238
Orlando, FL 32816-1395
United States
407-823-5839 (Phone)

HOME PAGE: http://www.larsonse.com

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