Local Option Sales Taxes and Fiscal Disparity: The Case of Georgia Counties

Abstract

While local option sales taxes (LOST) have become an important revenue source for local governments, there has been concern about the distribution of LOST revenues: the uneven distribution of sales tax bases may have introduced a new source of fiscal inequality and exacerbated existing fiscal disparity. Using Georgia county data (N=159, 1970–2000), this study examines whether and how LOST have affected local fiscal disparity. Our findings suggest that the effects of LOST on fiscal disparity vary with the approach to measure revenue‐raising capacity; thus the issue of LOST distribution is sensitive to the underlying conceptualization of “fiscal equity.”