Split-Rate Taxation

Definition

Split-rate (or two-rate) taxation is a property tax that levies a higher millage rate on land values than on building values. It is a partial, incremental form of land value taxation: instead of abolishing the building tax entirely, it shifts the balance toward land.

Terminology note: "split rate" and "split-rate property tax" are also used, unrelatedly, to describe a property tax that applies different rates by property class — residential versus commercial, for instance — with no land-vs-building distinction at all. Delaware's 2026 HB 462, which lets New Castle County school districts tax commercial and apartment property at up to 185% of the residential rate, is a live example of this other, non-Georgist meaning: it is a class-based rate differential, not a land-value instrument, and has no bearing on this page.

Why It Matters

Split-rate taxation is the most politically practical path to Georgist policy in jurisdictions that already levy a conventional property tax. Reducing the rate on improvements removes a penalty on building and renovation; raising the rate on land discourages holding sites idle. The further the ratio is tilted toward land, the closer the system approaches a pure LVT.

In Practice

The system is most associated with Pennsylvania, where state law permits municipalities to set separate rates. Pittsburgh (from 1913), Harrisburg, Allentown, Scranton, and others have used it. This created the natural experiment behind the strongest empirical evidence that the policy increases construction. For a mainstream, non-advocacy primer on the theory, the Pennsylvania record, and the practical obstacles (assessment difficulty, revenue adequacy, winner/loser politics), see the St. Louis Fed's Cohen & Coughlin (2005) survey. For worked parcel-level examples of what a revenue-neutral shift does to actual tax bills, see the Miller & Hoskins college-town simulations for South Bend and Princeton (advocacy-institute analyses, graded as such).

Harrisburg is the most-cited second Pennsylvania example after Pittsburgh: under Mayor Stephen Reed (1981–2009), the city taxed land at up to six times the rate on buildings, during a period in which vacant structures fell from over 4,000 to under 500 and building-permit activity rose substantially. As with Pittsburgh, attribution to the tax alone is contested — the period also saw sustained mayoral redevelopment initiatives — so the strongest claim is comparative: Harrisburg outperformed similar Pennsylvania cities that did not adopt split-rate taxation (see Harrisburg).

Baltimore (2026) is the newest major US city to weigh the idea. In July 2026, City Councilman Zac Blanchard introduced a bill calling for a public hearing — involving the city's housing, finance, planning, and small-business agencies — on what a split-rate system taxing land more heavily than buildings would mean for Baltimore, arguing the city could address its vacancy problem "without reducing the revenue that the city collects." The motivating problem is the city's roughly 11,600 vacant properties (down from about 16,000 in 2020; over 900 of them city-owned). Separately, and earlier, the Council had already approved a targeted escalation for vacant and abandoned homes specifically: the rate on such properties triples on 1 July 2026 and rises to four times the standard rate on 1 July 2027, with the higher schedule set to expire in 2029. That is a blunter instrument than a split-rate structure — it penalizes a designated status rather than repricing land across the board — but it is aimed at the same idle-holding incentive.[6] A separate 2026 Baltimore research effort, unconnected to Blanchard's hearing bill, tested whether land value can actually be estimated accurately there: Dr. Chester Harvey's hedonic model of the city's residential sales explained roughly 85% of price variability, a data point relevant to whether a Baltimore split-rate system would face the same land-cannot-be-assessed objection raised elsewhere. A third, concrete Baltimore development: a 2026 reassessment of the city's vacant land specifically revalued 11,539 vacant properties, adding roughly $159 million in assessed value, with a projected three-year total exceeding $360 million in newly captured vacant-land value — a direct illustration of how much value the city's prior assessment practice had been leaving off the books, and a concrete revenue base a future split-rate structure could draw on.[8]

Effects are not confined to the adopting jurisdiction itself: Yang (2024) finds Pennsylvania split-rate taxation slows employment growth in municipalities within about 5–10 miles but raises it in municipalities 15–20 miles away — a spillover pattern that is neither simply zero-sum nor simply win-win.

Practical Obstacles

Cohen & Coughlin (2005) is candid about the difficulties, drawing on Edwin Mills's (1998) Lincoln Institute analysis: separating raw land value from improved-property value is administratively hard, since land is rarely observed unimproved once it is developable, and hedonic pricing techniques are difficult to extend reliably to commercial parcels. On revenue adequacy, Mills estimated that even a 100% tax on land rent might raise at most roughly 1% of property value — insufficient by itself to replace conventional property-tax revenue in most jurisdictions, though Pittsburgh's own experience is cited by others (Netzer, Gaffney) as more optimistic. Cohen & Coughlin also flag a genuine theoretical counterargument, not just a political one: uniform taxation can outperform pure land taxation when land is partly absentee-owned or when landowners value risk-pooling across jurisdictions — qualifying the textbook "land taxation is always efficient" claim. Politically, any shift toward land creates clear winners (owners of underbuilt, high-land-value sites) and losers (owners of intensively improved, low-land-value sites), and the losers have a strong incentive to organize against it. A further methodological caution applies to the whole empirical literature: because no jurisdiction adopts split-rate taxation at random, Kwak (2009) argues that studies estimating its effects should account for the selection bias built into why a locality chose the policy in the first place.

See Also

• Brueckner (1986) — the canonical theory of why grading the tax toward land raises building intensity
• Walczak: Replacing the Irreplaceable — Ohio Property Tax Revenue Alternatives — a cautionary quantification of the cost of abandoning the property tax base for income/consumption taxes instead of shifting it toward land
• Land Value Tax · Split-rate taxation increases construction · Pittsburgh
• Detroit Land Value Tax Proposal (2023–24) — a recent attempt to bring split-rate taxation to a major US city outside Pennsylvania
• Washington DC's Land Value Assessment Bill (2026) — a 2026 bill laying the assessment groundwork for a future DC split-rate system
• Gaffney (1971): The Property Tax Is A Progressive Tax — Gaffney's finding that commercial land (highest land-share of value) bears the property tax most heavily is directly relevant to who wins and loses under a shift toward land
• Gaffney (1992): Rising Inequality and Falling Property Tax Rates — a 50-state farmland study finding higher property tax rates (i.e. a heavier land-relative-to-income burden) associated with smaller, more equal farm holdings
• Past Forward: Tracing the Property Tax Through Time and Place — historical illustrations of how property-tax design shapes the built environment

Sources

1. Richard Dye & Richard England (2010), Assessing the Theory and Practice of Land Value Taxation — used for the mechanism description and implementation survey (A/B-claims). wiki summary
2. Empirical base: Oates & Schwab (1997) · Plassmann & Tideman (2000) — used for the construction-effect evidence (B-claims; full caveats on the outcome page).
3. Jeffrey P. Cohen & Cletus C. Coughlin (2005), "An Introduction to Two-Rate Taxation of Land and Buildings," Federal Reserve Bank of St. Louis Review 87(3) — used for the Harrisburg example, the Mills (1998) assessment-difficulty and revenue-adequacy analysis, and the absentee-ownership/risk-pooling theoretical counterargument in §"Practical Obstacles" above (B/D-claims). wiki summary
4. Zhou Yang (2024), "The Spillover Effects of Land Value Taxation: How Can It Affect Your Neighbors' Job Growth?" The Journal of Real Estate Finance and Economics — used for the inter-jurisdictional spillover finding (B-claim). wiki summary
5. Sally Kwak (2009), "Biases in Analysis of Split-Rate Property Tax Reforms: Hawaii's Experience 1963–1979," Lincoln Institute of Land Policy Working Paper WP09SK1 — used for the selection-bias methodological caveat (D-claim; full discussion on the construction outcome page). Free PDF
6. "Could a split-rate property tax reshape Baltimore? City Council weighs option," Baltimore Banner coverage (July 2026), read 2026-08-14 via its Yahoo News syndication — used for the Blanchard hearing bill, the agencies involved, the "without reducing the revenue" quotation, and the 11,617/16,000/900+ vacancy figures (B-claims). The separate vacant-property rate escalation was re-verified on 2026-08-14 (daily-loop audit) and upgraded from C- to B-claim: CBS Baltimore, fetched and read directly, confirms the Council-approved increase to "three times the current tax rate" beginning in the 2026–27 tax year (Baltimore's fiscal year opens 1 July); the step to four times the standard rate on 1 July 2027 and the 2029 expiry are as reported in Baltimore Sun and Baltimore Banner coverage of the November 2024 vote. Note the two measures are distinct and years apart: the vacants escalation passed in 2024; Blanchard's split-rate hearing bill is a separate July 2026 initiative. See also the queue's originating item, Hoodline's July 2026 report (bot-blocked to this session).
7. "Gov. Meyer allows split-rate property taxes to remain the law — but not with his signature," Spotlight Delaware, 10 August 2026. spotlightdelaware.org — fetched and read directly (curl) 2026-08-16; used for the terminology-note footnote above: Delaware HB 462, the New Castle County school-district commercial/apartment rate cap at 185% of the residential rate (down from 200% under the 2025 predecessor). Corroborated by "Gov. Meyer walks on split property tax rate bill," Delaware Public Media, 9 August 2026 (also fetched directly). This is a property-class rate differential unrelated to the land-vs-building split-rate taxation this page documents; flagged here only to prevent reader confusion from the shared terminology, not integrated into the page's substantive content.
8. Greg Miller, "Property tax reform takes center stage," Progress and Poverty / Center for Land Economics blog (LVT Landscape #10), 26 August 2026. blog.landeconomics.org — fetched and read 2026-08-27; used for the 11,539-vacant-property reassessment, the ~$159 million assessed-value increase, and the projected >$360 million three-year total (B-claim; advocacy-blog reporting).