Abstract
States have long used the sales tax as a revenue source. Since the 1970s states started granting localities the option of levying local sales taxes to enrich their revenue portfolio. Local sales taxes are often structured to reduce local property taxes; in most localities this strategy prevails in referendum. Since sales taxes are more elastic than property taxes, substituting away from the latter poses the threat of increased revenue volatility. We employ a panel dataset of counties in the state of Georgia to examine the effects of local option sales tax on own-source revenue volatility. We decompose volatility into the long- and short-run, use a mean-variance approach in considering correct revenue portfolios across tax-instruments, and find that substitution towards sales tax amplifies revenue variability. Our study fills a niche in die revenue volatility literature; our results imply that sales taxes may have been overweighed in current revenue portfolios.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
