Lost and Found Tax Dollars : Local Option Sales Taxes, Property Taxes, and Own Source Revenue

The relationship between the local option sales tax (LOST) and property taxes and own source revenue is not well documented in the literature. This may be due in part to the aggregated nature of the data, which fails to capture different motivations for adoption of LOSTs. Using county-level data from 35 states, this study finds that LOSTs increase own source revenue and in some circumstances decrease property tax burdens. The primary contribution of this research is that it uses a policy variable, the LOST rate, to distinguish between the two types of counties that use their LOST revenues differently. This research represents the first step in bridging the gap between the LOST literature and the tax mix choice literature