Split-Rate Taxation and Business Establishment Location: Evidence From the Pennsylvania Experience

Abstract

This article estimates the relationship between business establishment location and split-rate property taxation. Using variation in split-rate adoption and intensity by municipalities across Pennsylvania, I apply data from the Census’s County Business Patterns (CBP) between 1994 and 2017 to estimate difference-in-difference (DiD) style models. Findings suggest that moving from conventional property taxation to a split-rate system is associated with an initial increase of between 60 and 107 business establishments. The number of business establishments does not appear to be sensitive to changes in the split-rate ratio after implementation, but the initial increase in the number of establishments declines each year after implementation by between 3.3 and 5.5 establishments, or about 5 percent.