.

The Pittsburgh graded tax law was enacted in 1913 and began to function January 1,1914. The law provided for the partial exemption from taxation of improvements upon real estate, with the rate of exemption increasing at each triennial assessment. This partial exemption has been effected by fixing from year to year a lesser tax rate on buildings than that levied upon land. Thus, the tax reduction on buildings as compared with land was 10% for the years 1914 and 1915 and an additional 10% every third year until the millage on buildings became 50% of that charged on land.

This consummation occurred in 1925. This law was enacted through the influence of Mayor William A. Magee in his first term.

The Pittsburgh graded tax law does not involve any discrimination in treatment of land and buildings insofar as appraising the value for taxation purposes is concerned. It is entirely a matter of fixing separate tax rates.

The entire tax revenue for municipal purposes is derived from taxes upon real estate. There are no taxes levied by the city government on any form of property or income. There is no loss of revenue through the graded tax, also no savings to the community as a whole. This law has no effect upon revenues or expenditures but merely brings about a difference in the sources of revenue. Its effect is upon the respective tax rates on land and buildings which are fixed annually by the city council at such figures as will produce the sum estimated as necessary to meet the expenditures set forth in the budget.

Contrary to the opinions of many people, the Pittsburgh graded tax plan is not the single tax, but is closely related to it.

The effect of the graded tax plan has been to stimulate building and prevent land inflation. During the years 1914-1920 building permits in Pittsburgh per 1,000 of increased population were 2,556 over New York City, 6,656 over Philadelphia and 186 over Detroit. During the years 1922-23-24 there was new construction in Pittsburgh of over one hundred million dollars, a record never before equalled in the history of that city. The Pittsburgh Civic Commission in 1912 contended that high land prices and high land rents were the chief obstacles to Pittsburgh's progress and a survey at that time indicated that the average value of land per acre in Pittsburgh as shown by assessments was second only to that in New York City. Although there is no proof, it seems certain that the graded tax law has had a tendency toward lower land prices because land speculation is no longer profitable.

While there has been some dissention regarding the effect of the law on building and land prices, there is positive proof that the law has lowered taxes. Two of the largest downtown office buildings show savings for 1925 of 10% and 15%, respectively, in each instance savings were in excess of $7,000.00. Two of the newly erected apartment buildings show savings of 27% and 33%, respectively, on one case actual savings being over $10,000.00. On the other hand, a number of manufacturing plants and department stores occupying valuable land do not show any benefits in lower taxes, but this is offset by savings due to freedom from taxes on machinery and on personal property. The chief direct beneficiary is the home owner. For example, in the 13th ward in 1925, out of 4,252 cases, there were 3,250 cases where the taxes were less under the new plan. Of the remaining 1,002 where the taxes were higher under the new system, 980 are vacant lots. The other 22 have not had sufficient improvements to warrant tax reductions. In 1925 the city building tax rate was 35% less than under the old flat rate system.

The Pittsburgh graded tax plan has been approved by leading firms, such as H. J. Heinz Co. and Westinghouse Electric & Mfg. Co., and endorsed by the Pittsburgh Real Estate Board. The new plan which is being propounded is to amend the law to reduce buildings and improvements on land to 1% of the amount levied on land.