In 1979-80, the city of Pittsburgh restructured its property tax system by raising the rate on land to more than five times the rate on structures. This paper explores the impact of this tax reform on the economic development of the city. Following some background on the theory of land taxation and Pittsburgh's historical setting, the paper presents an empirical analysis of the impact of the tax reform. Pittsburgh experienced in the 1980s a dramatic increase in building activity, far in excess of other cities in the region. The analysis suggests that, while a shortage of commercial space was a primary driving force behind the expansion, the reliance on increased land taxation played an important supporting role by enabling the city to avoid rate increases in other taxes that could have impeded development.
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