Implicit Land Taxes and Their Effect on the Real Economy

Summary

Daniel Murphy and Nathan Seegert's paper tackles a measurement problem: because tax assessors place different relative weights on land and structures than the market does, ordinary property tax systems generate an implicit land tax that differs, parcel by parcel, from the statutory rate — even though no jurisdiction has explicitly adopted land value taxation. The paper, first circulated as a Maxwell School working paper, is now published in the Journal of Public Economics — a top-five field journal — which strengthens the wiki's earlier assessment (2026-08-14 queue check re-fetched the authors' own publications page to confirm the venue and pull the published abstract, superseding the working-paper-only citation this page previously carried).

Method and Findings

Using parcel-level data on assessed values and transaction prices from U.S. counties, the authors estimate implicit land taxes by comparing assessor valuations against market hedonic valuations — i.e., how much of a parcel's assessed value assessors attribute to the land component versus what a hedonic model, fit to actual sale prices, says the land is really worth. Where assessors under-weight land relative to the market, the effective tax on land is lower than the statutory rate; where they over-weight it, the reverse.

The headline finding: there is substantial dispersion in implicit land taxes across and within metropolitan areas — meaning two otherwise-similar counties, or even two parcels in the same county, can face very different effective land tax burdens purely as an artifact of how their assessors happen to split value between land and structures.

That dispersion has real consequences. Counties with higher implicit land taxes experience faster growth in population density, business establishments, earnings, and demographic diversity — a pattern the authors read as consistent with the theoretical prediction that taxing land more heavily than structures encourages denser, more productive development (the same mechanism behind split-rate taxation's construction effect, here identified from assessment practice rather than from an explicit statutory rate difference).

Relation to the Georgist Case

This is unusually direct evidence for the land-taxation mechanism precisely because it does not rely on a jurisdiction deliberately adopting split-rate or land value taxation: it shows the same land-vs-structure tax-weighting effect operating by accident, as a byproduct of ordinary assessment practice, across the entire U.S. county panel. If assessment error alone — with no policy intent behind it — produces measurable differences in density, business formation, and earnings in the theoretically predicted direction, that is a hard data point for the underlying mechanism split-rate advocates invoke deliberately.

It also sharpens, rather than undercuts, the assessment-accuracy objection: the paper's whole method presupposes that land and structure values can be separately estimated well enough to detect a meaningful gap between what assessors do and what hedonic models say the market does — precisely the capability the objection questions. That the authors can measure the implicit tax at all, across the full U.S. county panel, is itself evidence the underlying valuation problem is tractable at scale, even as the paper's core finding (assessors routinely get the land/structure split "wrong" relative to the market) shows current assessment practice falls well short of best-practice separation.

Bears On

• Objection: Land value can't be assessed accurately — cuts both ways: assessment error is real and consequential, but the paper's method shows the land/structure split is measurable well enough to detect and correct.
• Benefit: Split-rate taxation increases construction — a national, assessment-driven analogue to the Pennsylvania split-rate evidence.
• Benefit: Taxing land raises productivity — the earnings and business-establishment growth findings bear directly on this outcome.

See Also

• Split-Rate Taxation
• Land value can't be assessed accurately
• Narrative: The Unearned Increment — cites this paper as the nearest current research frontier on decomposing a parcel's value into land and improvement components

Sources

1. Daniel P. Murphy & Nathan Seegert, "Implicit Land Taxes and Their Effect on the Real Economy," Journal of Public Economics (forthcoming/2026) — publications page and abstract fetched and read directly 2026-08-14 (curl, WebFetch blocked with a 403). danpmurphy.com — used for the published venue, the full abstract (parcel-level assessor-vs-hedonic methodology, the implicit-land-tax construct, the dispersion finding, and the density/business-establishment/earnings/demographic-diversity growth results), verified verbatim against the abstract text on the page (B-claim; abstract-level scan — the full paper was not independently fetched this session). Working-paper predecessor: Maxwell School PDF · 📄 Local copy.