Municipalities that institute a split rate property tax apply a different tax rates to the value of land and the value of the buildings on each parcel.  Some municipalities already apply a split (residential/commercial) tax rates.  Like tax increment financing, split (land/building) tax rates can be a strong incentive for additional development.   Consequently, such tax strategies should be applied only on in municipalities and districts with consistent planning and zoning in place to guide the resulting growth.  

Municipalities with split (land/building) tax rates lower the tax rate on the value of both existing structures and on new construction of buildings and improvements; and increase the tax rate on land values in a revenue neutral way. (This is often called a green tax shift.)  By shifting the burden of the existing property tax away from the assessed value of improvements and onto the unimproved value of land, which is largely related to its location and regulated development potential, it will create incentives for more efficient use of underutilized land.

Any investments in improvements either by private individuals or the community itself will result in generally increased land values, so any future tax revenue increases would be generated by increased land values. Future revenues generated by the assessment on land values will enable towns to further decrease the mil rate on improvements, thus creating even more incentives for more future growth. 

14.a    MAPC and allied organizations should assess potential application of split rate tax structures in Metro Boston

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