Split-Rate Taxation
A property tax that applies a higher rate to land than to buildings — a practical, incremental step toward land value taxation used by many Pennsylvania cities.
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.
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).
See Also
- Brueckner (1986) — the canonical theory of why grading the tax toward land raises building intensity
- 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
Sources
- 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
- Empirical base: Oates & Schwab (1997) · Plassmann & Tideman (2000) — used for the construction-effect evidence (B-claims; full caveats on the outcome page).