GROWTH AND VARIABILITY OF SCHOOL DISTRICT INCOME TAX REVENUES: IS TAX BASE DIVERSIFICATION A GOOD IDEA FOR SCHOOL FINANCING?

School districts in Ohio have the option of diversifying their revenue base by adopting income taxes. Using a panel of Ohio school districts that adopted a local income tax from 1990 to 2008, we find that revenues are procyclical and fluctuate only mildly. The estimated short- and long-run income elasticity of school district income tax revenues is 1.05 and 1.04, respectively. We also find that the school district tax base fully adjusts to its long-run equilibrium within 2 years. Finally, we show that school district income tax adoption does not provide more stability to total school district tax revenues in the short or the long run. (JEL H71, H75)
I. INTRODUCTION The school district income tax (SDIT) is a special tax earmarked for providing financial support to a local school district. As of January 2015 school districts in Iowa, [...]