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by Alanna Hartzok

Fifteen cities in Pennsylvania are pioneering an innovative approach to local tax reform that harnesses market incentives for urban renewal.

Opting for the so-called 'two-rate' or 'split-rate' property tax, these cities are lowering taxes on buildings, thereby encouraging improvements and renovations, while raising the tax on land values, thus discouraging land speculation. The resulting infill development as indicated by increased building permits means downtown jobs, efficient use of urban infrastructure, an improved housing stock, and less urban sprawl.

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published in Land Value Taxation: The Equitable and Efficient Source of Public Finance, an anthology edited by Kenneth C. Wenzer, published by M.E. Sharpe, Inc., New York, 1999

by Alanna Hartzok

Introduction

Pennsylvania has been experimenting with a new approach to local tax reform which offers an entirely different angle from other current reform proposals which consist attempt to reduce the use of property taxes while introducing sales or income taxes. This approach, known as the "split rate" or "two tier" tax, reforms the property tax itself in a way that appears beneficial on a number of indicators.

The property tax is actually two types of taxes - one upon building values, and the other upon land values. This distinction is an important one, as these taxes have significantly different impacts on incentive motives, development results, and economic consequences.

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06 December 2016
06 December 2016

 

 

 

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