Implications of the Coronavirus on Sales Tax Revenue and Local Government Fiscal Health
38 Pages Posted: 10 Apr 2020 Last revised: 13 Apr 2020
Date Written: April 8, 2020
The outbreak of the coronavirus pandemic has raised a considerable alarm about issues of public 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: Suggested Citation