April 27, 2010

The Time for Fair Taxes is Now

We can Preserve City Services Without a Property Tax Hike

By Stan Shapiro

On Thursday, the Coalition for Essential Services (CES) will rally behind a new proposal that would simultaneously raise money to preserve City services and progressively reform the Business Privilege Tax. Details of the rally are here. Details of the proposal are below....

Introduction

The City needs upwards of $75 million in order to preserve City services at current levels. CES believes that amount can be raised without imposition of a trash tax or a property tax increase. In addition, the CES proposal would provide a tremendous boost to small businesses throughout the City.

Proposal Summary

The City would exempt small businesses with sales in the City of less than $500,000 from paying the gross receipts portion of the Business Privilege Tax (BPT). These businesses would still pay the net income portion of the tax. The basic rate of the Gross Receipts Tax (GRT) would be rolled back to its 1996 level of 3 mills or .003%. Together these changes would raise approximately $75 million for the City.

Detailed Explanation

1) Based upon 2007 figures, about 84% of all BPT taxpayers - around 70,000 in all -- have receipts that total less than $500,000 per year. Together those businesses pay very little GRT, less than $8 million per year. If the City exempted all of those small grossing businesses, that would leave about 13,000 GRT taxpayers. Collectively those 13,000 businesses paid about $83 million in GRT in 2007.

2) The rate of the GRT in 2007 was very low -- .0015% -- less than 2/10th of one percent. That is way down from its highest point of .0039%, last levied in 1988. Doubling the 2007 rate to .003% would still leave the rate well below its maximum, and exactly where it was in 1996 after Mayor Rendell had cut the rate by 8%. As we have seen, the 2007 rate raised about $83 million from only the richest businesses. Doubling the rate to the 1996 level would therefore bring in another $83 million from those businesses, or a net of $75 million after deducting the $8 million that was paid by small businesses that our proposal would exempt.

Rationale

Putting the burden of increased taxes on workers, homeowners and tenants through an increase in real estate taxes or surrogate real estate taxes like a trash pickup surtax -- drives down the disposable income of poor and working people and harms us all. As an alternative, the CES proposal would impose the cost of maintaining current services on business. But in doing so, it would actually reduce the tax load on small businesses, while raising the revenue we need from businesses with the sales volume to best afford it.

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