Retail politics: Local sales taxes and the fiscalization of land use

Policy makers may view the local sales tax as an attractive alternative to the property tax. However if sales tar revenues are awarded to the jurisdiction where the sale occurs, local budgets are tied to the fortunes of the retail sector In California, use of the property tar has been greatly restricted, and the local sales tax is a key source of discretionary revenues for municipalities. During the period from 1971 to 1995, as the retail sector decentralized, central cities lost substantial ground to suburbs in per capita sales tar revenues. Moreover a survey of city managers indicates that the quest for retail development and sales tax revenues is a prime motivation for land-use decisions. Although such "fiscalization" of land-use policy is unlikely to markedly affect retail location, the California evidence suggests that the property tax has comparative merits in its ability to create incentives for more balanced development.