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SE 17

THE DISPROPORTION OF TAXATIONIN PITTSBURGH

BY

SHELBY M. HARRISONDirector, Department of Slirveya and Exhibits

Russell Sage FoundationNew York City

Siinininry of findings in an investigation of taxation ini'ittsburgh, as a part of the Pittsburgh Survey)

Publication No. SiOR>ptiuted from Readjust mk-VTo i.v T.vxatu-v

\'ol. LVIII of The Ankals of tho: r ^ A

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Reprinted from The Annals of the American Academy of Political andSocial Science, March, 1915

THE DISPROPORTION OF TAXATION IN PITTSBURGH

By Shelby M. Harrison,Director, Department of Surveys and Exhibits, Russell Sage Foundation,

New York City.

For many years, Pittsburgh, like all Gaul, was divided intothree parts. These divisions, which continued until 1912, consti-tuted a classification of real estate for taxing purposes, into ''agri-cultural" property paying one-half the tax rate prevailing in its ward,''rural or suburban" paying two-thirds, and "full city" propertypaying the full tax rate. The classification plan dates back to 1867,'when the boundaries of Pittsburgh were being enlarged, taking inparts of five adjacent townshipsback fifty years, when electric cars,telephones, and electric lights were unknown and when you couldcount on your fingers the American cities honey-combed with sewerburrows, water mains, and gas pipes distributing municipal servicesover large urban areas. On the theory that taxes were payments fordefinite benefits bestowed by government upon particular individuals,it was therefore deemed fair to discriminate in favor of farm and ruralproperty not sharing fully in city lighting, policing, fire protection

and sanitation. In other words, land classification was a measuredesigned to meet a specific condition.

The condition changed, however, with the growth of the city,but the discriminations remained on the statute books. The almostunavoidable result was that whole districts, similarly located andotherwise much alike, were placed in different classes; and in the sameway individual holdings, often in the same ward, were inequitablytaxed. For instance, in the east end of the city, property for somedistance along one side of Center Avenue, and also along FifthAvenuetwo main thoroughfaresin 1910, the time of this inves-tigation, was classed "full," paying the full tax rate, while at the

same time that on the other side of these streetsvery similar in

character, more built up, if anythingwas paying but two-thirds of

the rate. These were large districts. Anomalies in the classifica-

1 An Act of 1867 created two classes, "rural," and "full city;" in 1876 thethird class, "agricultural" was added.

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2 The Annals of the American Academy

tion of small individual pieces of property are illustrated in a blockon North Highland Avenue, bounded, on the other sides, by StantonAvenue, Beatty, and Hay Streets. This in 1910 showed two taxa-tion classes. Property fronting on North Highland and StantonAvenues was classed as rural, while just across Supreme Alley,which runs through the block and parallel to North Highland Avenueand Beatty Street, the properties fronting on Beatty Street wereclassed as full. North Highland had the street car line giving it afull city character, but the Beatty Street properties, while they hadsome little yard space, were closely built up.

But, to illustrate injustices that were more inherent in thesystem itself, up from the Allegheny River, near Highland Park,were 105 acres of good high-lying land suitable for plotting into citylots, which had been held out of the market by one family since be-fore the Revolutionary War. The estate was almost entirely sur-roimded by populous neighborhoods; on the east was the growingEast Liberty Section; and on the west the very congested tenementhouse region which was literally dammed up against the fences ofthe farm. The land was put through only the motions of farming,hay being the only crop that amounted to anything, and yet until1912 it never paid more than the "agricultural" one-half rate. With-in 300 yards, in the same ward, real estate closely occupied by workingpeople was taxed at full rates. Other illustrative instances couldbe related at length.

Basing the ''rural" class on picturesque grounds and shrubbery,and the ''agricultural" class on the presence of woods or large opentracts used in reality or ostensibly for farm purposesdefinitions laiddown by the law and the court^the Pittsburgh assessors returnedthe real estate valuations for 1910, as follows:

Full property $534,642,310Rural property 208,224,892Agricultural property 4,674,748

Total $747,541,950

Thus in 1910, real estate to the value of $212,900,000, or 28 percent of all, was classed in the rural and agricultural groups and escapedwith paying only two-thirds or less (one-half in the case of agricul-tural land) of the current rate of the wards where located. That is,practically 10 per! cent ol the total cash values brought the city

Taxation in Pittsburgh 3

no tax revenue whatever. Stated another way, in 1910, as a resultof the classification system, over one-fourth of the real estate of Pitts-burgh was relieved of one-third or more of its tax rates. The propor-tions were still higher in previous years.

The property classed as full comprised in the main all businessdistricts, including manufacturing sites and railroad properties, andthe congested residence districts where the mass of work people live.

PmSBURGHcsTATe cLASsipicATKW roR rvKPoccs or

LOCAL TAXAnO/l1910

TRt PITTSBVRGfl 5VKVEY

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OATA rVKISD BY TMtCOARP OP ASSesSORS

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MAP 1. GEOGRAPHICAL LOCATION OF THE THREE CLASSES OF REAL ESTATE

Of these, it was the latter, and the small storekeepers who servedthem, that suffered. For the former, the situation was mitigated

in various ways. Sixty-six feet of right of way, as well as a consid-

erable amount of other real estate owned by railroads operating in

the city, was exempt from local taxes and therefore did not suffer

from the full classification. Manufacturing properties, by certain

exemptions and tendencies toward leniency in making valuations,

got off with a much reduced full rate. Other downtown businessproperty, through the system of separate sub-district school taxes.

Tam AxxAUB or

m low nfte oon^med with anuJlfjglMMi liooda, Hie sietttesi anomaly of

EanMsalf kasi able were sabjeet toobe BaxMMm city laies.had lew, if aaj, dweHiuftB up(xi it.

of land and the under-oand in many

ifireci. For a generation Fitte-ataaaitkm acfaeme wfaidi, because of

r to hold great areas of miimproYed land,went gmming for themanwho unproved

ai Ihb whaim effect was a double tax rate.of "mral'' and '^fdU dty" prop-

the tax faj wmfhiH on expensive homes surroundedfluweu

property owned by

able to auppuri the govenunentwhilebj a MMie nbbon of graas, or none at all, and

block after block on both street and alley,

jndnded features other thanof bmden. Of these the

sid>-district sdiool taxAhhoi^^ ihe daaeifi-

of the aepaote ward rates, theatfaiibTltKlf.

. WUfe Fittsbmgh's cnrroit ex-niie, the erection and maintenance

by separate levies m the 03 tax dis-te. The Kofth Side (formerly AD^i^ieigr) paid a tax

in other parte

for meeting spedal ind^rted-in tax rates,

tefistricted in 1907 making 27 wafdsfonBerfy SB,* the old tax divisions remained, and

as fix tax rates. Forexample,wwdf property on the sooth side of the narrow

la IMitibm fe eldwaf^ oae hsfiaf beca added finer ffMiistfiet'aiai thBM #rfhcw veie dhiiei lalo two iaslac astnet* Mcl^ tmOdaff 83

ithtcstrbttrdcrs.

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6 ThiJ Annals of the American Academy

Classification and Separate Rates Combined. But these fac-tors, classification of land and ward rates, did not work inde-pendently of each other. What then was their result, workingtogether? Did the inequalities of the one offset the inequal-ities of the other, or did they together tend to double up incon-sistencies and injustice? To determine this, upon a map showing

SEPARATE TAX PISTKICTSwrrn katts affliep

1/^1910

T/AE rirTSDVRGR 5VKVEY

MAP 2. SEPARATE TAX DISTRICTS. WITH 1910 TAX RATES.

the nominal tax rates in each of the 63 different tax districts, wassuperimposed the map showing land classification. In other words,using the various separate tax rates as bases, we went over the city

and shaved off one-half the ward rate wherever we found land classedas agricultural, and shaved off one-third the rate where it was classedrural. This left full rates only where the land was classed as full.

Taxation in Pittsburgh 7

The result of this combination is that actual rates on assessed valua-tions varied in the different localities from 7.85 to 25 mills on thedollar. In our full report (see Volume Five, the PittsburghSurvey), these inequalities were brought out en masse by dividingthe detailed table of localities and rates into three large groups,placing all realty paying under 12 mills in the first, all paying above12 and under 16 in the second, and in the third all property paying16 mills and over. It was found that the low rates were being paidalmost entirely by large "agricultural" holdings and expensive resi-dence property, while the high rates were saddled upon small busi-ness realty, small residences, and congested tenement neighborhoods.The middle group included principally the downtown business wards,several manufacturing wards and a number of well-to-do residencedistricts. The conclusion from this grouping was inevitable. Theinequalities of the land classification and of the separate ward ratesdid not offset each other. Rather they tended to accentuate the

disproportions.

It may be objected that such conclusions as to the injustice ofthe tax burdens cannot be drawn until the tax is followed a stepfurther; that the ultimate payers of the tax, not alone the property

taxed, must be located. The answer is found in two theories of theincidence of taxation.

The first is the one held by the average business man, and is thatthe whole tax, both on land and on buildings, is shifted to the shoulder

of the tenant. The second, that held by the economists, is that inthe main, when both house and ground are occupied by the owner, the

real estate tax cannot be shifted, but is borne by the owner. Whenthe owner rents the property to another, the owner still bears the

tax on the land. The tax on the house, however, is shifted to occu-

pier or tenant. When, however, tax rates throughout a city are very

unequal, as is the case in Pittsburgh, and when the people tend to

congregate in certain quarters of the city and seem unwilling to move

out to the suburbs, as is usually the case with immigrants, a part at

least of the taxes on land that is rented, and all the tax on the build-

ings, tend to be shifted upon the tenants. So on the theory of the

business man and of the economist, the conclusion that the bulk of

the local real estate taxes fell upon the renting population, the small

home owners, the working people, and the small storekeepers they

deal with, is not changed.

8 The Annals of the American Academy

Any Mitigating Elements in the System. A question next takenup was whether there were any other elements in the system oflaying the municipal tax burden which tended to minimize these

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