The Impact of E-SPLOST in Reshaping State Educational Capital Outlay: Evidence from Georgia, 1993-2017

This study examines the impact of the Educational Special Purpose Local Option Sales Tax (E-SPLOST) on state capital outlay in Georgia, USA, focusing on intergovernmental fiscal relations. Although previous studies have addressed the local effects of E-SPLOST, this study explores its impact on state capital grants. Using a 25-year longitudinal dataset (1993-2017) and a two-way fixed effects model, this study found that E-SPLOST initially increases state capital grants, but then leads to a long-term reduction in grants, in accordance with fiscal substitution theory. This shift underscores concerns about reliance on sales taxes and increasing educational inequities. The study emphasizes the role of the state in ensuring educational equity and provides implications for policymakers seeking to balance local fiscal autonomy with equitable educational opportunities.