The Impact of Urban Land Taxation: The Pittsburgh Experience
Landmark empirical study finding Pittsburgh's 1979–80 shift toward heavier land taxation was followed by a building boom that comparison cities did not see.
Summary
Wallace Oates and Robert Schwab's 1997 National Tax Journal study is the most-cited empirical examination of land value taxation in a US city. It analyses Pittsburgh's experience after the city sharply increased the rate at which it taxed land relative to buildings.
The Reform
In 1979–80, facing fiscal pressure, Pittsburgh restructured its property tax to lean heavily on land. By the 1980s the city was taxing land at roughly five times the rate applied to structures — by some measures the most aggressive split-rate regime in the United States.
The Data
Oates and Schwab compared the average annual value of building permits in the 1980s against the prior decade for Pittsburgh and 15 comparison cities in the northeast and midwest:
- Pittsburgh saw roughly a 70% increase in the real value of building permits in the 1980s relative to the late 1970s.
- It ranked at or near the top of the 15-city sample; most comparison cities saw flat or declining construction over the same period.
- The authors note Pittsburgh's economy was not booming in this period (it was losing population and shedding steel jobs), so a general demand surge cannot explain the construction increase.
The Authors' Caution
Oates and Schwab are careful not to claim the tax was the sole cause: Pittsburgh also pursued a downtown public–private development push in the 1980s. Their conclusion is that the split-rate structure played a meaningful, plausibly significant role — strong suggestive evidence, later reinforced by the multi-city panel of Plassmann & Tideman (2000).
Bears On
Sources
- Wallace E. Oates & Robert M. Schwab (1997), "The Impact of Urban Land Taxation: The Pittsburgh Experience," National Tax Journal 50(1):1–21. Full text (PDF)
- Related multi-municipality evidence: Plassmann & Tideman (2000) — wiki summary