DIFFERENTIALS IN TAXATION BETWEEN URBAN, SUBURBAN AND RURAL PROPERTIES
In several of the schemes of annexation or consolidation which have been described, property in the suburban and rural areas has been taxed at lower rates than property in the strictly urban portions. The purpose of these differentials is to induce property-owners in these territories to support annexation.
The principle of tax differentials has been applied in but four metropolitan cities--Baltimore, Philadelphia, Pittsburgh, and St. Louis. In the first two it is still in operation. In the others it was abolished some years ago, but has again been proposed in connection with annexation or consolidation schemes. Whether the principle is economically sound and equitable is questionable.
One of the earliest instances of partial or complete exemption of suburban properties from city taxes is found in Baltimore. As early as 1797, and again in 1806 and 1816, laws were enacted exempting newly annexed territories from all or certain city taxes. The law of 1816 established the principle that no property in the newly annexed territory was to be taxed at the full rate until a specified density of population or building development had been attained.
In later laws a different method was employed. The suburban or unimproved sections were exempted from the so-called "city tax," which was levied only in the strictly urban or improved sections of the city, for watch, street lighting, and other city services rendered there. The other localities were subject only to certain city-wide levies, such as the court, poor, school, highway and bridge levies, for services common to all. The boundaries of the district subject to the city tax were fixed in 1817 by a special commission and were later extended from time to time, always exempting properties containing less than six houses per acre. Thus the area of exemption was gradually reduced. In 1876 the area of city taxation was extended to the city limits and all properties became subject to the same tax. The practi-