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Approval of BIRT and wage tax cuts hailed as turning point by Philadelphia business leaders

Isabel Tehan | Philadelphia Business Journal

Jun 16, 2022

Leaders of the Chamber of Commerce for Greater Philadelphia and the Diverse Chambers Coalition lauded City Council’s approval of decreases in local business and wage taxes as a significant move to reverse the city's anti-business reputation.

The tax cuts have the potential to “change the trajectory of the city,” said Susan Jacobson, chair of the Chamber of Commerce for Greater Philadelphia.

Council approved a $5.6 billion city budget for fiscal year 2023 in a preliminary vote on Wednesday, including a reduction in the wage tax from 3.83% to 3.79% for city residents and a decrease in the Business Income and Receipts Tax (BIRT) on net income from 6.2% to 5.99%.

Jacobson called Council's approval of the measures “bold leadership.”

“Their decision to cut taxes is a job creator and really a clear signal that Philadelphia is committed to restarting our economy,” she said.

Susan Jacobson, board chair at the Chamber of Commerce for Greater Philadelphia

The BIRT is one of the primary reasons Philadelphia's tax structure is considered far from business-friendly. In addition to the levy on net income, it also taxes companies $1.415 per $1,000 on gross receipts. A February report for Pew Charitable Trusts found that the city's future job growth and economic recovery from the Covid-19 pandemic would depend in large part on efforts to restructure the tax system to attract more businesses.

The reduction in the BIRT rate will be the first time the city's business tax on net income will be below 6% since 1988. Approval of the tax cuts marks a turning point after several years of legislation that has not been in the best interests of businesses and job creation in the city, leaving many business owners asking if the city valued them, said William Carter, vice president of local engagement and advocacy for the Greater Philadelphia Chamber of Commerce.

"It's like slowing down a fast moving train and getting it to go in the reverse direction," he said.

Carter believes the cuts are a significant step to incentivizing businesses to operate in Philadelphia and grow within the city.

The BIRT is seen as the number one barrier to doing business in Philadelphia by members of the Diverse Chambers Coalition, said Regina Hairston, president and CEO of the African American Chamber of Commerce. The Diverse Chambers Coalition was formed in fall 2021 by bringing together the African American Chamber of Commerce of Pennsylvania, New Jersey and Delaware; the Asian American Chamber of Commerce of Greater Philadelphia; the Greater Philadelphia Hispanic Chamber of Commerce; and the Independence Business Alliance to form a unified voice in the city on issues impacting small, minority-owned businesses.

“For diverse businesses to grow, stay and thrive in Philadelphia, they needed to see some relief with the BIRT,” said Hairston. The Inclusive Growth Coalition, a collaboration between members of the Greater Philadelphia Chamber of Commerce and the Diverse Chambers Coalition, spearheaded a lobbying effort by the business community during the city's budget process, advocating for the reduction of the wage tax and the BIRT. “This was the entire business community coming together, saying that we want the city to grow jobs and we want it to be inclusive, not just to work on larger businesses or certain zip codes, but every business in Philadelphia,” said Hairston.

By Isabel Tehan | Philadelphia Business Journal Jun 16, 2022

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