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Political Economy of Property Tax Reform: Hawaii’s Experiment with Split Rate Property Taxation

Author

Listed:
  • Sally Kwak

    (Department of Economics, University of Hawaii at Manoa)

  • James Mak

    (Department of Economics, University of Hawaii at Manoa)

Abstract

Economic theory suggests that switching from a general property tax to a split-rate tax increases land use efficiency and stimulates urban core development while preserving the environment and reducing urban sprawl. Under split-rate property taxation, land is typically taxed at a significantly higher rate than improvements. Beginning in 1965 Hawaii experimented with a statewide split-rate property tax system to encourage economic growth and effect land reform. The experiment was ended in 1977. Following the transfer of property taxing powers to the counties in 1978, some counties brought back the split-rate property tax at times. Since 2006, Kauai County has adopted the unusual practice of taxing improvements at a higher rate than land for most property classes. This paper chronicles and explains the rationale behind Hawaii state and county experiments with split rate property taxation.

Suggested Citation

  • Sally Kwak & James Mak, 2009. "Political Economy of Property Tax Reform: Hawaii’s Experiment with Split Rate Property Taxation," Working Papers 200915, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200915
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_09-15.pdf
    File Function: Originally posted in July 2009; revised on December 23, 2009
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    References listed on IDEAS

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    Cited by:

    1. Néstor Garza, 2019. "Spatial and Dynamic Features of Land Value Capture: A Case Study from Bogotá, Colombia," Public Finance Review, , vol. 47(3), pages 603-622, May.

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    More about this item

    Keywords

    Property taxes; split rate property taxation; tourist taxes;
    All these keywords.

    JEL classification:

    • H - Public Economics

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