Hou study on local sales tax in US counties published in JPBAFM
Feb 28, 2017
Jongmin Shon & Yilin Hou
Journal of Public Budgeting, Accounting & Financial Management, February 2017
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, the authors assemble a dataset of counties in all states for FY1970-2006 but focus on 12 states not threatened by intra-jurisdictional competition. The authors' 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.