Understanding Land Value Taxation

Published December 1, 2006

Land value taxation (also known as the split-rate tax or two-tiered tax) is a type of real property taxation. Whereas the typical real property tax taxes both land and improvements on the land at the same rate, land value taxation (LVT) taxes land at a higher rate while reducing or even eliminating the tax on improvements.

For example, Clairton and its school district in Allegheny County, Pennsylvania have a tax rate of 103 mills on land and 4.32 mills on buildings. A mill equals $1 of tax for every $1,000 of assessed property value.

LVT usually ends up reducing the amount of tax paid for buildings and increasing the amount paid for land. This has been shown to provide an incentive for “infill” development in urban areas and new development where needed, and to reduce sprawl pressure where development is not wanted.

Joshua Vincent