Jack Tomczuk | Metro Philadelphia
Jun 1, 2022
Another “briefcase brigade” may be brewing.
Twenty years ago, members of the business community marched to City Hall to protest then Mayor John Street’s veto of a bill lowering Philadelphia’s wage tax. The effort was successful, but the tax remains a problem, employers say.
“The wage tax has been around here for 40 (or) 50 years. Way too long,” said Judith von Seldeneck, founder of Diversified Search Group, who participated in the brigade. “It’s a major problem.” Von Seldeneck spoke at a rally Wednesday afternoon at City Hall alongside other business and political leaders pushing for significant reductions to the wage and business income and receipts tax, known as BIRT.
Cutting the levies would spur economic growth, aid Philadelphia’s recovery from the pandemic and help alleviate the city’s high poverty, said the event’s organizers, from the Inclusive Growth Coalition, a group of business organizations.
“Philadelphia is difficult to do business in,” said Jennifer Rodriguez, president of the local Hispanic Chamber of Commerce. “Philadelphia is expensive to do business in.”
The wage tax, which is paid by residents and people who work in the city, is among the highest in the nation, and Philadelphia’s BIRT tax is unique in that it applies to a company’s profits and its total income.
Inclusive Growth Coalition representatives argued the tax structure hinders Philadelphia’s economic competitiveness and is responsible for slow job growth compared to other East Coast cities.
“The urgency of this moment, it cannot be understated,” said Sue Jacobson, chair of the Greater Philadelphia Chamber of Commerce. “At no other time in recent history have we had a more pressing need.”
Since 1970, the number of jobs in Philadelphia has dropped by 22%, the coalition notes, even while New York and Washington, D.C., have seen double-digit gains. Philadelphia also has fewer small and mid-sized businesses, according to a 2020 report.
The coalition has been lobbying City Council and Mayor Jim Kenney’s office for tax changes since late last year, and time is running out, at least for the next fiscal year, which begins July 1. Council and Kenney must reach a budget agreement in the coming weeks, and much of the focus has been on property taxes.
New assessments were released in May, and overall residential property values increased 31%, though some homeowners saw much higher jumps.
To offset the additional revenue, Kenney has proposed raising the popular Homestead Exemption, devoting more dollars to the Longtime Owner Occupants Program and reducing the wage tax.
The rate for residents would drop from around 3.84% to 3.7% over two years, while commuters would pay 3.44%, rounded down from 3.4481%. “This does not have to be an either-or moment,” said William Carter, a vice president at the regional chamber of commerce. “We don’t have to think about whether we can lower property taxes and cut wage and business taxes. We can do both.”
A recent PEW survey found that 55% of Philadelphians believe reducing business tax rates would only help owners boost profits, not create jobs; and progressive council members have tended to push back against planned cuts to BIRT and the commuter wage tax, citing the city’s funding challenges.
“It’s the colleagues that aren’t here (that) we need to get to,” Councilman Allan Domb told the crowd Wednesday. “They need to understand this problem.”
Councilman Derek Green, who also spoke at the rally, argued City Hall had enough money to reform the tax code and address issues such as gun violence, affordable housing and public education.
“The best way for Philadelphia to achieve progressive goals is by enhancing prosperity and creating more jobs,” Khine Zaw, president of the Asian American Chamber of Commerce of Greater Philadelphia, said at the rally.
Kenney administration spokesperson Kevin Lessard told Metro that the mayor’s office has made meaningful strides in reducing taxes, noting BIRT changes, including a 2016 move to exclude the first $100,000 of business income.
In addition, Lessard added in an email, Kenney’s administration has cut the wage tax to its lowest rates since the 1970s.
“As we navigate through the impacts of the pandemic, we must continue to advance equitable economic recovery strategies, support business growth and create economic security for all Philadelphians, ensuring that our city stays competitive in an ever-changing economy,” he said.
Joe Grace, a spokesperson for Council President Darrell Clarke, said in a statement that lawmakers are “considering an array of proposals to mitigate large property tax increases due to increased assessments, and other tax proposals as well to make Philadelphia more economically competitive.”
“Council will do its due diligence, protect taxpayers, and deliver a budget on-time by the end of June,” he added.