Local sales tax adoption in U.S. counties: Internal and external forces

Abstract

This study aims to explore the underlying patterns in tax innovation. Prior studies of local sales taxes still leave a gap in the literature and render the results inconclusive because the studies cover either state level or localities within a single state for a short period. To cover the gap, we assemble a dataset of counties in all states for FY1970-2006 but focus on 12 states not threatened by intra-jurisdictional competition. Our empirical analyses yield evidence that a county adopts local sales tax for political and economic rationale rather than fiscal condition. Accordingly, regional diffusion has positive effects on local sales tax adoption in a county. These findings contribute substantively to sales tax literature while confirming policy diffusion.

Citation

Shon, J. and Hou, Y. (2017), "Local sales tax adoption in U.S. counties: Internal and external forces", Journal of Public Budgeting, Accounting & Financial Management, Vol. 29 No. 3, pp. 289-318. https://doi.org/10.1108/JPBAFM-29-03-2017-B001