Split-Rate Taxation and Business Establishment Location

This paper estimates the relationship between business establishment location and split-rate property taxation. Using variation in split-rate adoption and intensity by municipalities across Pennsylvania, I apply data from the Census County Business Patterns between 1994 and 2017, to estimate difference-in-difference (DID) style models. Findings suggest that moving from conventional property taxation to a split-rate system is associated with an immediate increase of between 60–107 business establishments. The number of business establishments does not appear to be sensitive to changes in the split-rate ratio after implementation, but the initial increase in the number of establishments declines each year after implementation by between 3.3–5.5 establishments, or about 5 percent.