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Philly businesses want tax cuts. The next City Council might be divided.

Max Marin, The Inquirer

Apr 24, 2023

Candidates diverge greatly on whether to lower business taxes, and other ways the city could attract more business.

Philadelphia business groups have long argued that the city should lower its business and wage taxes. Some candidates running for City Council this year agree, while others don’t — emphasizing an ideological divide between progressive and moderate Democrats over the direction of city government.

In interviews with more than 20 Democrats vying for five at-large City Council seats in the May 16 primary, candidates disagreed on whether to cut the city’s wage tax for workers and the Business Income and Receipts Tax (BIRT). Progressive candidates either opposed cuts, or emphasized worker protections and seeking alternative funding streams so city services wouldn’t suffer. Other candidates expressed conditional support for cuts if revenue projections remained strong, while others showed a more limited grasp of the tax policies at the center of debate.

While the next mayor will have significant influence over Philadelphia’s tax structure, Council will also play a key role in keeping or changing tax and regulatory policies that big corporations and small-business owners alike have described as uniquely onerous.

Philadelphia has one of the highest wage taxes in the country, and is the only major city that imposes a double-dip tax on both profits and revenue for businesses, according to Pew Charitable Trusts.

Mayor Jim Kenney and City Council have enacted incremental reductions in recent years, and Kenney has proposed further reductions in the BIRT and wage tax for the next fiscal year.

But business groups want more drastic change, and more broadly, some fear a progressive takeover of at-large seats in an unusually competitive race. Council has lost several Democrats who were considered moderates, and the insurgent Working Families Party hopes to claim the last Republican-held seat. Some business interests, concerned over the leftward tilt on Council in recent years and using a political action committee, are now poised to spend seven figures in the relatively low-profile race.

“It’s all about the jobs — creating more good-paying, family-sustaining jobs. We want to be able to say we’re leading in that area, and we’re not right now,” said Chellie Cameron, director of the Chamber of Commerce for Greater Philadelphia, which lobbies City Hall for business-friendly policies but has not endorsed anyone in the Council race.

‘I want to treat the city as a business’

Old City director Job Itzkowitz, a business-backed candidate in the race, said business tax cuts wouldn’t be as necessary if the city provided better services — such as expanding citywide street sweeping to beautify commercial corridors.

“Only neighborhoods with means get basic city services, and the city could do the work,” he said.

Cybersecurity lawyer Jalon Alexander, who’s been endorsed by business-aligned group Philly Forward, called business tax cuts “a net positive.” Meanwhile, business consultant Donavan West, who led the local African American Chamber of Commerce, argued for even steeper cuts.

“I want to treat the city as a business,” West said.

Incumbent Councilmember Isaiah Thomas, who is running for a second term and also has the backing of business groups, introduced a small but historic BIRT tax cut last year. He argued that small businesses stand to benefit the most from BIRT cuts.

“Big businesses like Comcast collect the majority of their profit outside of Philadelphia,” Thomas said. “Our smaller businesses are paying BIRT on 100% of their profits.”

Nina Ahmad, a candidate who has also been endorsed by the business-aligned Black Leadership PAC as well as labor unions, said she’d prefer to increase a tax exemption on the first $100,000 of every company’s gross receipts, though that idea has proven to be a nonstarter in City Hall over fears of legal challenges.

Several candidates for Council did not seem to understand fundamental tax concepts, such as a state law that forbids the city from taxing different businesses at higher rates.

Councilmember Jimmy Harrity, a Democrat, took office after a special election in November, said he was still getting caught up on the wage and business tax debate that has been raging in City Hall for decades.

Focus on businesses or workers?

Self-styled progressive candidates are focused on improving conditions for workers instead of cutting taxes for businesses.

“What’s best for workers is what’s best for businesses,” said at-large Council candidate Amanda McIllmurray, the former political director of Reclaim Philadelphia. “I want to make sure we’re growing our city, our population, and our economy. We can do that in a way that makes our city thrive by investing in people who already live here for job training.”

As for business growth, McIllmurray wants to revive talks to create a public bank to help disadvantaged small businesses with low-interest loans. (Former Councilmember Derek Green pushed the idea for years but faced restrictions with state law.)

Some progressives, such as third-time candidate and longtime LGBTQ activist Sherrie Cohen, rejected decreases to either the wage tax or BIRT.

While floating costly proposals, progressives on the campaign trail often emphasize seeking PILOTS, or payment in lieu of taxes, for large nonprofits such as the University of Pennsylvania. (The school is the largest private property owner in the city, but pays no property taxes on buildings used for academic and non-profit operations.) Scaling back the property tax abatement is another popular answer to funding expanded city services.

Rue Landau, a housing lawyer who has won support from the Democratic establishment and progressive groups, said wage and business tax cuts need to be balanced against the need to expand city services at a time of converging social crises.

“I want to do everything I can to support small businesses, and I would support the wage tax cuts and the BIRT tax cuts, so long as it could be offset by other revenue,” Landau said, of PILOTs. “Right now, we are missing opportunities from these institutions here in Philadelphia. They need to give back.”

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