City Council’s agreement on Wednesday night to accept modest but historic wage and business tax cuts marks one of the first major business-friendly moves by the city government in decades, advocates and patrons said. Bill.
Council member Isaiah Thomas introduced the Business Income and Revenue Tax (BIRT) cut, to 5.99% from 6.2%, while a proposal tabled by council member Katherine Gilmore Richardson lowers the payroll tax rate from 3.8398% to 3.79% for city residents, and from 3.4481% to 3.44% for people who work in Philadelphia but live outside of the city.
“It may seem like a small reduction, but it’s very monumental and historic. The rate hasn’t been below 6% since 1988,” said councilman Allan Domb, who along with Thomas and Gilmore-Richardson led a group demanding cuts to the city’s dreaded payroll tax. and BIRT.
Philadelphia ranks among the highest in the nation in payroll taxes, and doubles its businesses through corporate income and receipts tax – the only major US city to do so. Employers and employees who choose to locate just outside the Philadelphia city limits often cite the two taxes as their primary reasons.
Supporters of the cuts argued that lower taxes would help small businesses that have battled inflation and financial losses from the pandemic.
“The City Council has decided to help our citizens and to increase Philly,” Councilman Derek Green said.
“This is the first time I remember that in one vote we cut payroll taxes and also small business taxes.”
The cuts emerged following a vocal lobbying effort by the city’s five major chambers of commerce.
“This is great news,” said Sue Jacobson, spokeswoman for the Greater Philadelphia Chamber of Commerce.
Jacobson was part of Ed Rendell’s administration “when Rendell was mayor and implemented tax cuts that people thought were small at the time. But those cuts literally changed the perception and trajectory of the city. We have all witnessed the extraordinary impact of these cuts.
All of the various chambers worked together as a coalition: the African American Chamber of Commerce; Hispanic Chamber of Greater Philadelphia; the Asian American Chamber, the Independence Business Alliance/LGBTQ+ Chamber of Commerce and the Greater Philadelphia Chamber of Commerce.
Will the downward tax trend continue? Domb said he hoped so.
“In the United States, the highest-taxed municipality is New York, at 16.2%, and Philadelphia at 16.1%. The other highest are cities in California at 8.8%,” he said.
“This reduction will help tens of thousands of small businesses, and the various chambers have done a phenomenal job,” Domb said.
The 5.99% rate is permanent, until and unless the city council votes to change that, he said.
“It’s a reduction, but it’s a start. We need to do more, maybe under the next mayor,” Domb said.
The bill requires a second reading and will not become law until a final vote next Thursday, the last Council session before the summer recess.
While the reduction from 6.2% to 5.99% equates to a reduction of approximately 3½%, “this reduction is very important because it signals to business owners and the people of Philadelphia that the city is ready to grow the economy,” said Regina Hairston, president of the African American Chamber of Commerce.
“For too long, black and brown businesses have felt like they have no voice on city council. what we saw [on Wednesday’s late-night session] was bold leadership that said black and brown businesses had been devastated by the pandemic. They haven’t been given an environment to thrive – until now. This is the signal sent to the rest of the Council that we are not giving up on black businesses. We know you were devastated.
Longtime advocates for big business were softer in their praise.
“It’s a step in the right direction, a clear acknowledgment by city leadership to send a very positive message to employees and employers that Philadelphia wants to improve its competitive position, and this year is critical,” Jerry said. Sweeney, managing director of Brandywine. Realty Trust and advocate for commercial tenants in the city.
” But this is only the beginning. We were hoping for a long-term commitment, say a 10-year program or framework for the city to reduce both salaries and BIRT taxes,” Sweeney said.
The Inclusive Growth Coalition – which includes the various chambers and other organizations – wanted a BIRT tax cut closer to 3%, according to its members.
“That certainty would be more compelling, but doing nothing also sends a negative message,” Sweeney said. “Even taking this step is a good signal. The city recognizes that the tax burden on employees living and working in the city is high and punitive, and that the cost of doing business puts Philly at a competitive disadvantage.
Could there be future cuts? Perhaps, Sweeney speculated, “if this incredible coalition remains strong in the future. Hopefully this is the start of a pivot that many of us have been advocating for for years.
Still, experts call it a gradual win. Research has shown that of the 30 largest US cities, only Philadelphia taxes local businesses on both net income and gross receipts. “The cut in the income portion, if passed, would be the largest in several decades,” said Thomas Ginsberg, senior manager of The Pew Charitable Trusts’ Philadelphia research and policy initiative.
The Philadelphia Inquirer is one of more than 20 news outlets producing Broke in Philly, a collaborative reporting project about solutions to poverty and the city’s push for economic justice. Find all our reports on brokeninphilly.org.