Georgias Local Option Sales Tax PDF Download

Since the 1970s, local governments in Georgia have been authorized, upon voter approval, to levy a one-percent general-purpose Local Option Sales Tax (LOST), which is earmarked for property tax relief. Using data during 1975-2002, this study examines the adoption of the LOST in Georgia counties through a discrete-time event history analysis. The dependent variable is the binary variable of whether a county eligible for the LOST will adopt it in a particular year. According to Mohr's theory, the probability of the adoption is negatively related to the strength of the obstacles prohibiting the innovation and positively related to (1) the motivations to innovate and (2) the availability of resources for overcoming the obstacles. Most hypotheses of the study are supported by maximum likelihood estimations. The motivations of the adoption are higher in counties with higher property tax millage rates and the potential of sales tax exportation. The obstacles include high existing sales tax rates and severe tax competition. The major resource for overcoming these obstacles is the adoption of the LOST in other Georgia counties.