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Biases in Analysis of Split-Rate Property Tax Reforms

Hawaii’s Experience 1963-1979

Sally Kwak

March 2009, English

Some localities levy split-rate property taxes, with one rate on land and another on improvements. Simple economic theory suggests this type of tax increases land use efficiency while reducing sprawl. However, empirical analyses of these effects is complicated by the potential non-randomness in adoption (or not) of split-rate systems by localities. To better understand this source of bias, we provide a case study of one particular state, Hawaii. We focus on describing the political, economic and legislative history of split-rate tax legislation in the state over a sixteen year period, 1963-1979.


Economics, Land Value Taxation, Local Government, Public Policy, Tax Reform, Taxation