Pittsburgh. Henry Pollakowski ( 1982) was unable to find much in the way of 'adjustment
effects' as measured by the number of property transactions. However, his data extended
only from 1976 to 1980. Steven Bourassa ( 1987) explored the effects of Pittsburgh's tax
system on housing development. Using monthly data on the value of new residential
building permits as his dependent variable, Bourassa found that the tax rate on improvements, but not the rate on land, was a statistically significant determinant of the level of
residential building activity. Bourassa's findings, while of some interest, are limited in
scope, for, as we shall see, the major impetus to development in Pittsburgh has been in the
non-residential sector. Of more relevance to our concerns is an interesting study undertaken in the mid 1980s by the Pennsylvania Economy League ( 1985). At the request of Mayor Richard Caliguiri, the League examined the effects of the graded tax on both the
development of the city and the equity of the tax system. Drawing both on extensive
interviews with 'local development experts' and some quantitative analysis of the graded-
tax ratio and development of different properties, the League concluded that: 'The graded
tax has very little effect on development' (p. ii). 3.
As Nicolaus Tideman has emphasized to us, the Bentick-Mills timing effect depends
critically on the systematic association of land assessments with actual use. Simple random errors or inaccuracies in assessments will not in themselves compromise the neutrality property of land-value taxation.
The commercial building boom in Pittsburgh under Renaissance II has encompassed
several major projects: PPG Place (six buildings, including a 40-storey office tower), One
Oxford Center (a 46-storey office tower and retail complex), The Steel Plaza/One Mellon
Bank Center (a 53-storey office tower and retail complex that includes the main station of
the Light Rail Transit system), Allegheny International's headquarters, the Liberty Center,
the Hillman Complex and several others.
6. The assessment-sales ratio in Pittsburgh is 0.25, so that the nominal tax rates appearing in Table 6.1 must be divided by 4 to obtain measures of effective tax rates. 9. Clearly, not everyone would agree with this assessment. Walter Rybeck ( 1991), for example, quotes the Pittsburgh City Council President as follows: 'I'm not going to say the land
tax is the only reason a second renaissance occurred, but it's been a big help' (pp. 4-5). 10.
There are, however, crucial differences between the structure of the income tax in Philadelphia and in Pittsburgh. In Philadelphia, the tax is a commuter tax; the suburbs around Philadelphia do not have wage taxes of their own. In contrast, in Pittsburgh the first claim
on a person's income resides in his place of residence. So when the city of Pittsburgh
raises the wage tax, suburbs tend to do likewise in order to get what, from their perspective, is essentially 'free money'. For this reason, the incentives for businesses to leave the
city would be somewhat weaker in the Pittsburgh case than in Philadelphia. Nevertheless,
higher wage taxes in the Pittsburgh metropolitan area could be expected to have a detrimental impact on economic growth in both the city and suburbs.
Bartik, Timothy J. ( 1991), Who Benefits from State and Local Economic Development
Policies?, Kalamazoo, Michigan: W.E. Upjohn Institute for Employment Research.
Bentick, Brian L. ( 1979), "The impact of taxation and valuation practices on the
timing and efficiency of land use", Journal of Political Economy, 87, 859-68.
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Local Government Tax and Land Use Policies in the United States:Understanding the Links.
Contributors: Helen F. Ladd - Author, Lincoln Institute of Land Policy - OrganizationName.
Publisher: Edward Elgar.
Place of publication: Cheltenham,UK.
Publication year: 1998.
Page number: 142.
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