FLORIDA SALES TAX REVENUE: A COMPARATIVE STUDY TO DETERMINE THE RELATIONSHIP BETWEEN SALES TAX RATE AND SALES TAX REVENUE IN FLORIDA

Sales tax is the primary source of revenue in the state of Florida. It is the most revenue contributing tax base in the state's tax structure; therefore, the state depends on it for the allocation of capital expenditures, and for the enhancement of economic growth.; As a result of continuous sales tax revenue shortfalls, the sales tax rate has been frequently increased for more possible sales tax revenue collection. Such increases were experienced in 1968, 1982, and 1988 respectively.; The frequent decision to increase the sales tax rate when sales tax revenue shortfall threatens is the interest for this study. Therefore, the objective of this study is to determine and analyze the relationship between sales tax rate and sales tax revenue, and to determine the correctness of the conventional notion that an increase in the sales tax rate will effect an increase in sales tax revenue.; The study will contribute to existing knowledge of the two variables in study by determining the correlation between the variables: Sales Tax Rate (Independent Variable), and Sales Tax Revenue (Dependent Variable). The study is focused on correlation analysis, and tested: Correlation Coefficient "r", Coefficient of Determination "r2", Significance Test of "r", and Significance Test of "r2", all with 95 percent confidence level, (Alpha = O.05).; All test statistics were not significant at the 95 percent confidence level. This signifies that there is no correlation between sales tax rate and sales tax revenue, therefore, an increase in sales tax rate will not necessarily cause an increase in sales tax revenue.; Consumers attitude towards the price of goods may more explain the result from this study about the correlation between sales tax rate and sales tax revenue. Tax rate increases on a particular commodity may decrease the number of such commodities purchased relative to the number that would have been purchased in the absence of a tax rate increase.; The study supports Grove and Kahn (1952) notion that state tax system should be considered in relation to the nature of income movement. It supports Wilford (1965) that an increase in the tax rate will not yield an increase in the tax revenue. The study also supports Legler and Shapiro (1968) whose study indicates a little reliability in tax rate coefficient for determining revenue responsiveness. On the other hand, it opposes Friedlander, Swanson and Due (1973) that 100 percent increase in tax rate will increase revenue by a very high margin.; This study has justified the indication that the sales tax rate has no independent bearing to the performance of sales tax revenue.