Political Economy of Property Tax Reform: Hawaii's Experiment with Split‐Rate Property Taxation
AbstractEconomic theory suggests that switching from a general property tax to a split-rate tax increases land use efficiency and stimulates urban core development while preserving the environment and reducing urban sprawl. Under split‐rate property taxation, land is typically taxed at a significantly higher rate than improvements. Beginning in 1965 Hawaii experimented with a statewide split‐rate property tax system to encourage economic growth and effect land reform. The experiment was ended in 1977. Following the transfer of property taxing powers to the counties in 1978, some counties brought back the split‐rate property tax at times. Since 2006, Kauai County has adopted the unusual practice of taxing improvements at a higher rate than land for most property classes. This article chronicles and explains the rationale behind Hawaii's state and county experiments with split‐rate property taxation.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal American Journal of Economics and Sociology.
Volume (Year): 70 (2011)
Issue (Month): 1 (January)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0002-9246
Other versions of this item:
- Sally Kwak & James Mak, 2009. "Political Economy of Property Tax Reform: Hawaii’s Experiment with Split Rate Property Taxation," Working Papers, University of Hawaii at Manoa, Department of Economics 200915, University of Hawaii at Manoa, Department of Economics.
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- Bowman, John H. & Bell, Michael E., 2008. "Distributional Consequences of Converting the Property Tax to a Land Value Tax: Replication and Extension of England and Zhao," National Tax Journal, National Tax Association, vol. 61(4), pages 593-607, December.
- Jeffrey P. Cohen & Cletus C. Coughlin, 2005. "An introduction to two-rate taxation of land and buildings," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 359-374.
- Oates, Wallace E. & Schwab, Robert M., 1997. "The Impact of Urban Land Taxation: The Pittsburgh Experience," National Tax Journal, National Tax Association, vol. 50(1), pages 1-21, March.
- Richard L. Pollock & Donald C. Shoup, 1977. "The Effect of Shifting the Property Tax Base from Improvement Value to Land Value: An Empirical Estimate," Land Economics, University of Wisconsin Press, vol. 53(1), pages 67-77.
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