The years-long battle over how Philadelphia can reform its notoriously high wage tax rate is now pitting two of the city’s business organizations against one another with Philly’s political leaders backing differing sides.
The Chamber of Commerce of Greater Philadelphia released a statement last month opposing the Levy-Sweeney Plan for tax reform, named for Center City District executive director Paul Levy and Brandywine Realty Trust CEO Gerard Sweeney.
The Levy-Sweeney Plan was drafted a few years back, after decades of the city trying to find other sources of income beside its hefty wage tax (currently at 3.9004 percent for those who live and work in the city and 3.4741 percent for non-residents) and business-related taxes. The plan calls for taxing commercial properties on the front end but lowering the cost of doing business in the city by separating how residential and commercial taxes are collected.
The Center City District – which is dedicated "to enhance the vitality of Center City Philadelphia as a thriving 24-hour downtown and a great place to work, live, and have fun," according to its mission statement – backs its leader’s plan.
"The city has lagged in job growth and has one of the highest urban poverty rates, despite more than two decades of vibrant growth and development in Center City and University City," CCD said in a statement based on its "Philadelphia: An Incomplete Revival" report earlier this year.
"Last summer, both the Pennsylvania House and Senate overwhelmingly passed HB 1871, a bipartisan effort that will provide Philadelphia with the flexibility to assess properties used for business purposes up to 15 percent higher than residential properties, so long as all the incremental revenues raised are used to lower the City’s wage and business taxes," CCD's release said.
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But that plan to lower Philly’s tax (it would still come nowhere near to the 1 percent wage tax levied on people living and working in some Montgomery County municipalities) never came to fruition, and now lawmakers are pushing a new Senate bill (SB 41) that looks to give the same authority to back the Sweeney-Levy Plan.
The Chamber of Commerce of Greater Philadelphia doesn’t want lawmakers to move ahead with the bill, however.
In its statement opposing it, the Chamber calls for local control to continue to bring down the wage and business taxes, and asks legislators to delay voting on the pending proposal.
"The proposed legislation SB 41 and anticipated House legislation on the same subject seeks to change Pennsylvania’s Uniformity Clause to allow Philadelphia to set two different tiers of property tax — one for commercial properties and the other for residential homeowners," the chamber wrote. "In exchange for higher commercial property taxes, the plan calls for corresponding reductions in wage and business taxes — designed to spur growth and job creation citywide."
Instead, the Chamber proposes what it says is a local approach to lowering taxes and it lays out its plan in five steps: lowering the cost of government; pension reform; real estate taxes; wage and business taxes; and use and occupancy tax.
CCD, however, sees growth via the Sweeney-Levy plan already under consideration (which in past years has had wide support in the state) and won't advance the chamber’s alternate proposal.
"The constitutional amendment, if passed again in the current session in Harrisburg, will provide a framework that enables Philadelphia to implement the recommendations of two previous tax commissions, while ensuring no gap opens in the City’s budget," CCD said. "The goal is to get the wage tax below 3 percent for the first time in 50 years and cut the net income portion of the Business Income and Receipts Tax (BIRT) in half."
Neither Paul Levy nor Gerard Sweeney agreed to NBC10’s request for interviews. And, a chamber spokesperson said its opposition statement would stand as its remarks.
Mayor Jim Kenney, however, did give NBC10 his thoughts on the tax squabble.
According to spokesperson Lauren Hitt, "the Mayor supports the Levy-Sweeney plan as the best proposal out there to create flexibility for serious tax reform that will promote job growth."
But the Democratic mayor could be swayed.
"Of course, he remains open to listening to all options on the table," Hitt said. "He has heard the Chamber’s proposal. There are a number of pieces of their proposal that we agree with and are already implementing or pursuing — pension reform, increased education funding, making government more effective and efficient, and continued wage tax reduction."
"But, even with those changes, we still need a tax structure that makes Philadelphia more competitive with other big cities when it comes to business attraction and job growth," Hitt said, "and Levy-Sweeney does that."
Council President Darrell Clarke wants to see the uniformity amendment clause changed, but is unsure if the Sweeney-Levy Plan is the correct way to fix Philly’s business-restrictive tax structure.
"The Sweeney-Levy plan amends the uniformity clause while further capping tax rates for commercial properties, potentially enshrining a huge tax break for wealthy commercial properties into the state constitution," Clarke spokeswoman Jane Roh said. "Philadelphia is the poorest large city in the country and we already struggle with tax-exempt status for wealthy universities and major hospitals. If there's a credible explanation for why we should be prioritizing tax caps for Center City high-rises at this time, we've yet to hear it."
State Rep. John Taylor, the bill’s sponsor, called the Chamber’s opposition a charade, according to a City & State Pennsylvania report.
"They’ve never been for it," The Philadelphia-based Republican told City & State. "They said they were but they weren’t. But I don’t see it being stopped no matter who's against it at this point. We’re looking at getting support from the statewide Chamber of Commerce. And our members will be reluctant to change their votes this season."
All the sides agree on one thing: Philly’s current tax structure needs to change. Kenney wants to use that desire to get a plan passed.
"We all want the same thing which is a more competitive Philadelphia that produces more family sustaining jobs. What we’re discussing is how to get there."
