May 12, 2010

Article in Inquirer Coauthored by NN VP

Interesting article about fairness of Phila. tax

By SD

An article coauthored by the vice-chair of NN may be of interest to you. Citizen equity starts with fair taxation. Stan co-authored the article with Anthony Oliver. It is titled "Make Philly's taxes fairer" A change in the city's gross-receipts tax would level the playing field for all.

By Stanley Shapiro
and Anthony Oliver

...Continued from home page

The Article

Regressive taxes - making the poor pay more - are not only morally wrong, they're bad for Philadelphia. They push residents out of the city, destroy our tax base, and underfund city services, crippling our infrastructure, safety, and quality of life. Regressive taxes put the needs of big businesses before the needs of Philadelphia residents and families. Unfortunately, Philadelphia has a tax structure that has grown steadily more regressive over the years, as evidenced by the real-estate tax.

It used to be that everyone except a few charitable-property owners had to pay real- estate taxes. However, in the 1970s the city was authorized by state law to grant tax abatements to help commercial developers revitalize deteriorated neighborhoods. Instead, City Council declared all of Philadelphia to be deteriorated, allowing Center City developers to be the main beneficiaries of this policy.

In the last 10 years, a new wave of abatements were created. Commercial abatements were extended from 5 to 10 years, with residential construction also being abated for 10 years. There were no dollar caps added, no proofs of need required, and no income caps imposed.

The result? Former Phillie Pat Burrell gets a virtual check from the city for $37,284 a year in forgiven real-estate taxes. He gets this not for any thrills he gave fans, but for being rich enough to buy a $2.6 million condo in Center City. He stated he would have bought the apartment without an abatement - but he hasn't turned the free money down.

While they were using abatements to give huge bonanzas to wealthy property owners, Council was leaving low-income taxpayers behind.

Since 1996 the city has steadily reduced the wage tax for everyone. The rate has declined from 5 to 4 percent. That cut is worth $20,000 a year to a corporate executive earning $2 million. It's worth $200 to a clerk working in the same office earning $20,000. Council did enact a wage-tax credit for low-wage workers in 2004 - however, it has deferred its effective date three times. It is still not scheduled to take effect until 2013, and then only in a watered-down form.

The city has also steadily reduced the gross-receipts tax (GRT) with big businesses benefiting the most. The GRT rate has been cut from a high of .0039 in 1988 to .0014 today. If you own a struggling corner store with sales of $100,000, your tax has gone down about $250 annually. If you're an out-of-state beer distributor with sales in the city of $10 million, you would be saving about $25,000 annually.

Now the city needs money, and all of the proposals before Council - the trash transfer fee, the sugary beverage tax, and the flat real- estate tax increase - would again impose the greater burden of paying for city services on the middle-class and poor. However, the Coalition for Essential Services (CES) is asking Council to do something entirely different.

Information developed by Councilwoman Maria Quiñones Sánchez shows that a GRT rate rollback to 1996 levels would raise $83 million per year for essential city services, but cost big corporations only $1,500 for every million in sales. The rate rollback would fall on businesses wherever they're located, creating no incentive for businesses to leave the city; in fact, much of the new revenue would come from out-of-town businesses selling goods and services into Philadelphia.

CES is asking Council to implement that rate rollback, and also to exempt all businesses with sales in Philadelphia of less than $500,000 from paying any GRT. This would cost very little city revenue, while at the same time providing a solid boost to existing and start-up neighborhood companies. The rate rollback coupled with a small business exemption would raise $75 million per year for the city.

Decades of budget crises have demonstrated that regressive taxes are unsustainable: eventually, we run out of services to cut and poor people to tax. Philadelphia needs to pursue progressive taxes that benefit our job-creating small businesses while raising revenue from those who have long avoided paying their fair share. The mayor and Council would be wise to take this opportunity to turn toward a sustainable, progressive tax policy for Philadelphia.

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