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May/June 2005, 
Vol. 87, No. 3
Posted 2005-05-01

An Introduction to Two-Rate Taxation of Land and Buildings

by Jeffrey P. Cohen and Cletus C. Coughlin

In the U.S., land and improvements to that land (e.g., buildings) are generally taxed at the same rate. This article describes historic and current arguments for two-rate (or split-rate) taxation, which taxes land at a higher rate than structures. In theory, two-rate taxation reduces deadweight losses associated with distortionary taxation and generates additional economic activity.