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ESTIMATING SALES TAX REVENUE CHANGES IN RESPONSE TO CHANGES IN PERSONAL INCOME AND SALES TAX RATES

This study is concerned with the effects of changes in sales tax rates, per capita personal income, and population upon sales tax revenues. The rate elasticity is found, on the average, to be 93; that is, a 100% increase in the sales tax rate will increase revenue by 93%. Differences in base, with limited available data, do not appear to affect the elasticity significantly. The income elasticity is found to be less than one, while the population elasticity is found to be highly variable, but in some instances in excess of one.