Consider the experience of two Pennsylvania cities that have had split-rate property taxation for over 20 years: Harrisburg and Scranton.

From Basket Case to Model City. The City of Harrisburg began a gradual shift to split-rate property taxation in 1977. At the time, the city had lost nearly half its 1950 population and its downtown district was a dead zone. The city was declared one of the most distressed urban areas in America. Using split-rate property taxation in conjunction with other revitalization tools, Harrisburg has made an impressive comeback. In 1994 the city issued the highest number of building permits for any year in its history. Once plagued by more than 4,200 vacant structures, Harrisburg now has fewer than 500. The number of businesses on the tax register has risen from 1,908 in 1981 to 4,541 as of 1994. In the mid-nineties, Harrisburg was twice listed among the top twenty-five American cities for housing affordability. All of this revitalization and redevelopment activity has occurred by shifting to split-rate taxation, and not by raising taxes or instituting new taxes: no tax increases of any kind have been voted on in Harrisburg since 1987.

Reenergizing ‘The Electric City’. The City of Scranton was another Pennsylvania city that was experiencing dramatic declines in its population and employment in the 1970s and early 1980s. For Scranton, a former powerhouse during Industrial Era, the loss of both people and jobs during this period resulted in the erosion of its tax base at the same time that the federal government was reducing its level of financial assistance to cities. In response to these trends, Scranton instituted split-rate property taxation in 1979 which nearly doubled the tax rate on land, held the tax rate on buildings and other improvements constant, and entirely eliminated taxes on new construction. Stephen Cord, Research Director for the Center for the Study if Economics, compared Scranton’s development activity with that of the nearby city of Wilkes-Barre that had retained conventional single rate property tax (both cities had equivalent tax revenue per capita and similar demographic characteristics). In the two years following Scranton’s change to split-rate property taxation (1980-81), average annual building permits increased 22 percent in Scranton but decreased 44 percent in Wilkes-Barre from the three previous years (1977-79).