The Spillover Effects of the Two-Rate Property Taxes in Pennsylvania

This project is the first to empirically investigate the spillover effects of two-rate (split-rate) property taxation in Pennsylvania. Using a rich dataset, this paper extends the existing research by offering important evidence on the impact of two-rate property taxation on adjacent municipalities as well as the spatial dynamics of the spillover effects. The empirical model separately identifies the externalities associated with two-rate property taxation while controlling for the influence of traditional property taxation on adjoining jurisdictions. The study shows interesting results that two-rate property taxation slows down employment growth in close neighbors but speeds up employment growth in neighbors within a longer distance. The findings suggest that two-rate property taxation exhibits differential spillover effects across space.

Keywords: Two-Rate Property Taxation, Land Value Taxation, Spillover Effects