All Is Not LOST in Texas? An Outcome-Oriented Analysis of Local Option Sales Tax Choices on Measures of Economic Growth

Abstract

Are municipal-level local option sales taxes (LOST) in Texas associated with long-term economic development outcomes? The Texas 4a and 4b LOST options fund economic development projects managed by a dedicated municipal-level economic development corporation (EDC). Instead of short-term outputs, we consider associations with three primary long-range outcomes: property value growth, population growth, and new home construction. Three regression analyses examine economic growth between 2011 and 2015 for Texas municipalities while controlling for county-level nesting effect, local capacity, and other contextual factors. The implementation of the 4a industrial development LOST shows a small significant positive association with population growth, albeit at the .10 level. The 4a LOST is also selected as part of the optimal model for property value growth despite not being significant. Implementation of the broader 4b community development LOST is not found significant nor included in any of the three outcome-based models. In each case, the county-level nesting effect is highly associated with economic development outcomes, while municipal-level capacity measures, such as property tax collected per capita, household median income, and the percentage of 4-year college graduates also show strong associations. Municipalities more dependent on the manufacturing sector show a significant negative association with all three economic development outcomes.