County Governments and Democratic Decision Making: Explaining Why Counties Seek Approval of Local Option Sales Taxes

Abstract

Local option sales taxes have become an important source of local revenue across the United States. Thirty-three of the 50 states have granted authorization to their counties or cities (or both) to levy local option sales taxes, and said taxes generated nearly $50 billion in 2005, which accounted for 11% of all local tax revenue nationwide. Even though local option sales taxes have significant impacts on a county's ability to fund programs and services, little has been written about the decisions of counties to place such taxes on the ballot. Using demographic, fiscal, and political variables, a model is developed that explains the decision to place a county transportation sales tax on the ballot. Modeling and analysis reveal that counties behave strategically as the impact of demographic, fiscal, and political factors on the decision to place a local option sales tax on the ballot is shaped by whether the county is making an initial attempt to adopt, a subsequent attempt to adopt after voter rejection, or a renewal attempt when an existing local option sales tax is nearing its sunset date.

Lost and found tax dollars: The impact of local option sales taxes on property taxes and own source revenue

“…The electoral data is taken from CQ Press (2010). Ideology is not just identified as an important component of the tax mix literature, but also within the emerging literature on why LOST referendums pass (Green, 2006;Green, 2014;Hamideh et al, 2008). An increase in Republican voters is expected to produce more support for property taxes than sales taxes and lower own source revenues.…”

A Review of Funding Mechanisms for US Floodplain Buyouts

“…The small tax, normally ranging from 0.05-2%, must be approved by municipal or county voters before it is added to the established state sales tax [48]. LOSTs currently account for 10% of all local tax revenue across the country, having been authorized in 33 states [49]. Revenue from a LOST program is collected by the county or municipal government and is typically used to ease reliance on property tax revenue and to bolster municipal general revenue funds [48].…”

“…Revenue from a LOST program is collected by the county or municipal government and is typically used to ease reliance on property tax revenue and to bolster municipal general revenue funds [48]. This form of tax carries a "sunset" date, which can be based on a timeframe or amount of revenue generated, and requires renewal legislation by voters or a tax phase out [49]. This funding mechanism represents an important financial tool for local and state governments to distribute the funding burden (or federal cost matching) of high cost projects like buyouts across residents.…”

Local option sales taxes and county rainy day funds

“…LOSTs can reduce the pressure brought on by cuts in intergovernmental aid as well as increase local government autonomy (Mchugh & Jolley, 2012;Jung, 2001). LOSTs can be designed so that revenues are earmarked for the general fund or for particular types of spending such as education, transportation, and property tax relief (Green, 2014;Zhao, 2005). At present, thirty-six states authorize their local governments to levy a LOST (Afonso, 2015).…”