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An introduction to two-rate taxation of land and buildings

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  • Jeffrey P. Cohen
  • Cletus C. Coughlin

Abstract

When taxing real property at the local level in the United States, land and improvements to the land, such as buildings, are generally taxed at the same rate. Two-rate (or split-rate) taxation departs from this practice by taxing land at a higher rate than structures. This paper begins with an elementary discussion of taxation and the economic rationale for two-rate taxation. In theory, moving to a two-rate tax reduces the deadweight losses associated with distortionary taxation and generates additional economic activity. The paper also provides a history of two-rate taxation in the United States and a summary of studies attempting to quantify its economic effects. Discussions of the practical and political challenges of implementing two-rate taxation complete the paper.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2005)
Issue (Month): May ()
Pages: 359-374

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Handle: RePEc:fip:fedlrv:y:2005:i:may:p:359-374:n:v.87no.3

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Keywords: Taxation ; Property tax;

References

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  1. Richard W. England, 2003. "State and Local Impacts of a Revenue-Neutral Shift from a Uniform Property to a Land Value Tax: Results of a Simulation Study," Land Economics, University of Wisconsin Press, vol. 79(1), pages 38-43.
  2. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, American Economic Association, vol. 66(5), pages 743-53, December.
  3. Eleanor D. Craig, 2003. "Land Value Taxes and Wilmington, Delaware: A Case Study," Working Papers, University of Delaware, Department of Economics 03-14, University of Delaware, Department of Economics.
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Cited by:
  1. Miklós Antal & Jeroen C.J.M. van den Bergh, 2014. "Macroeconomics, Financial Crisis and the Environment. Strategies for a Sustainability Transition," WIFO Working Papers, WIFO 464, WIFO.
  2. Sally Kwak & James Mak, 2011. "Political Economy of Property Tax Reform: Hawaii's Experiment with Split‐Rate Property Taxation," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(1), pages 4-29, January.
  3. Grazi, Fabio & van den Bergh, Jeroen C.J.M., 2008. "Spatial organization, transport, and climate change: Comparing instruments of spatial planning and policy," Ecological Economics, Elsevier, Elsevier, vol. 67(4), pages 630-639, November.
  4. Kemp, R. & van den Bergh, J., 2006. "Economics and Transitions: Lessons from Economic Sub-disciplines," MERIT Working Papers 038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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