Adjusting Sales Tax under Property Tax Limits: Rates, Base, or More?

• In Event: Tax Limits

Abstract

While previous studies have found that tax and expenditure limitations (TELs) shift revenue sources toward those not subject to TELs—such as sales taxes—the specific pathways remain unclear. Sales tax revenues can increase not only through rate hikes but also by expanding the range of taxable items, promoting sales tax-generating industries, or through economic growth driven by TELs or secular factors. This study addresses this gap by examining how counties in New York responded to the state’s 2011 property tax levy cap. Event study results show that the cap increases sales tax revenues after a two- to three-year delay. I will identify what drives the sales tax increase using various data, including taxable sales by industry and the Census Bureau’s County Business Patterns. This paper informs policymakers by clarifying how the shift toward sales taxes occurs, enabling a clearer understanding of its outcomes and implications.

Author

• Ikhwan Kweon, ikw222@uky.edu