Abstract
Local option sales taxes (LOSTs) approved by voters have emerged over the past several decades as a method of funding transportation projects. LOSTs have been especially popular in California, where many counties rely on them to fund a large share of street, highway, public transit, and other transportation projects, as the buying power of federal fuel taxes and some other transportation revenues has waned. These voter-approved tax measures generally outline specific projects to be funded, but if these projects exceed their projected costs or if tax collections fall below predicted levels, some of these projects may be delayed or canceled. LOSTs thus inherently come with a degree of uncertainty tied to broader economic forces, including the supply of and demand for taxable goods and services.The COVID-19 pandemic in California provides a vivid and timely example of the link between sales tax revenues and characteristics of regional economies. This study identifies factors associated with LOST revenue generation during the pandemic. We find that LOST revenues fell sharply, but recovered quickly statewide. Wealthier counties tended to recover LOST revenues more slowly than poorer counties.
