One of the main reasons Philadelphia is the poorest major city in the nation is that it is also one of the most heavily taxed.
Of the dozens of taxes Philadelphians pay, the payroll tax is the highest in the country; the sales tax is 33% higher than in the suburbs surrounding the city; a business tax weighs on both income and net income, and the property tax system is unequal and riddled with inaccuracies despite reforms.
The result is that Philadelphia’s heavy tax burden discourages the presence of businesses that can create jobs – a factor inextricably linked to the high poverty rate. The next mayor needs a consistent tax policy that cuts payroll and business taxes to promote job growth and reduce poverty.
In addition to fighting crime and improving schools, where mayoral candidates stand on taxes is a key issue voters should consider to make an informed choice. The Inquirer editorial board reviewed candidate websites, voting results, public comments and guidance documents to craft the following snapshot.
State Representative Amen Brown did not respond to a request for the guidance document, but his website mentions using tax policy to grow small businesses. He wants to give new small businesses a three-year tax abatement on income tax and business receipts in the city.
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The corporate income and receipts tax has long drawn the ire of businesses because it taxes both income and net income. Brown said the abatement would give small businesses a chance to establish themselves before being hit by the tax. He likened his plan to the 10-year property tax abatement on new construction that has helped spur development. It’s a nice idea, but hardly a game changer.
Grocery mogul Jeff Brown also didn’t provide a guidance document, and his website doesn’t mention taxes. In an interview with the editorial board, Brown said he favors maintaining phased payroll and business tax cuts. He opposed Mayor Jim Kenney’s soda tax, but said if elected he would not repeal it. While Brown is an outsider promising to upend the status quo, his tax policy seems conventional.
Judge James DeLeon’s website does not discuss taxes, but does mention holding listening sessions with business owners, especially small business owners. He provided a two-page white paper that identified the onerous tax problem but offered no substantive solution.
Allan Domb, a former city councilor and real estate mogul, sponsored several bills in Council aimed at reducing payroll and business taxes. He provided a five-page white paper and plans to publish an economic development and anti-poverty plan in the coming weeks.
Domb wants to accelerate payroll and business tax cuts to create jobs. He opposes the wealth tax proposed to the city council last year and said he voted for the soft drink tax but no longer supports it.
Domb doesn’t think higher taxes will solve the city’s problems. He noted that the city’s budget had increased by 50% under Kenney, but poverty, crime, and underperforming schools remained unchanged or even worse.
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“Our city’s problems are not due to a lack of available funding, but rather poor prioritization, planning and implementation,” Domb said. Amen. Now what will happen?
Derek Green, a former city council member, provided a three-page white paper calling for “pragmatic” and “inclusive” tax reforms that tell businesses Philadelphia is “open for business.”
Green cited the need to continue cutting payroll and business taxes. In particular, he wants a tax policy focused on helping small businesses and wants the Department of Revenue to aggressively tackle sales taxes.
As a council member, Green helped broker a deal with the Kenney administration to reduce income tax and corporate receipts. at 5.99%. He introduced legislation to transform the property tax into a land value tax, a move that experts say would create a fairer tax structure by placing more emphasis on taxing the value of land rather than on the buildings there. This is an idea that deserves further study.
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Helen Gym, activist turned city councillor, voted against reduce the payroll tax and oppose the reduction of business and parking taxes. She led efforts to reduce the tax abatement program that helped spur development. Gym and two other council members have proposed a wealth tax that critics say could drive the wealthy out of town.
Gym’s website refers to “fair taxation” but provides no details. A four-page white paper calls for a tax commission focused on “fairness and growth”. In an email, Gym said it would “work with the business community to deliver new grants and incentives that prioritize the growth of black, brown, and local businesses” as well as “affordable housing, life sciences and manufacturing”.
She added that the current tax structure is “onerous and needs to change”. But given Gym’s voting record and rhetoric, cutting taxes doesn’t seem like a top priority.
Cherelle Parker’s website does not provide details on policy issues, but as a member of city council, she led a failed effort to reduce the city’s parking tax. As a state representative, Parker lobbied for a cigarette tax in Philadelphia and increased the collection of delinquent taxes.
Parker said in an email that she wants to move from the city’s heavy reliance on payroll taxes to taxing real estate. A similar idea was presented several years ago by Paul Levy of the Center City District and the prominent local real estate investor Gerard Sweeney but died in state legislature.
Parker said she would work with her former Harrisburg colleagues and Gov. Josh Shapiro to pass the measure. It’s easier said than done.
Maria Quiñones Sánchez, a former city councilor and self-proclaimed pragmatic progressive, does not mention taxes on her website, but does provide a five-page white paper that refers to the drive to reform the tax code to “ease the burden on small companies” and make the big companies “pay their fair share”.
In the Council, Sánchez rejected phased payroll tax cuts and pushed for deeper reductions in the net profits portion of the corporate income and revenue tax. She lobbied to help small businesses by exempting the first $100,000 of business income from corporate income and receipts tax. It’s a good start, but it takes a lot more given the city’s tax burden.
Rebecca Rhynhart, the former city comptroller, highlighted economic development issues on her website where the word tax is only mentioned once. She would “evaluate our tax system so that it balances the desire for business growth against excessive burdens imposed on low- and middle-income residents.” It’s not much to go on.
During the pandemic, Rhynhart pushed back on Kenney administration plans to cut services and raise taxes. Instead, she identified several cost-cutting measures. At an event last summer, Rhynhart shot down the idea of a wealth tax.
As the city’s top financial watchdog, Rhynhart has published numerous reports that have identified ways to spend taxpayer dollars more efficiently, including one that shed light on the heavy police budget. Another thoughtful report weighed the costs and benefits of the tax abatement program. Voters need to see more.
Substantial solutions to the city’s heavy tax structure are the most effective way for the next mayor to create jobs and reduce poverty. Much of the other rhetoric is noise voters have heard before.