The Case of
Harrisburg, Pennsylvania started using the two-rate tax in 1975 with a very
modest shift of tax off buildings, onto land. At that time it was known
as a municipal "basket case," with over 4000 vacant structures. Since then
it has shifted more tax off buildings on to land in several steps. Today
rate on land is 4.89%, the tax rate on buildings is 0.9618%. Today there
are less than 500 vacant structures and Harrisburg is considered an up and
Mayor Reed in a 1994 letter to Patrick J. Toomey said the following. "The
City of Harrisburg continues in the view that such a land value taxation system,
which places a much higher tax on land than on improvements, is an important
incentive for the highest and best use of land in already developed communities,
such as cities. […] Moreover, the same two-rate system tends to discourage
real estate speculators and others who would be inclined under normal conditions
to tie up land tracts that could otherwise be used for development purposes.
With over 90% of the property owners in the City of Harrisburg, the two-tiered
tax system actually saves money over what would be otherwise a single rate
system that is currently in use in nearly all municipalities in Pennsylvania.
[…] I should note that the City of Harrisburg was considered the second
most distressed in the United States twelve years ago […] Since then,
over $1.2 billion in new investment has occurred here, reversing nearly three
decades of very serious decline." A coincidence? Perhaps not.