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Wednesday, April 14, 2010

Council Ponders Business Tax Changes

A budget analysis commissioned by City Council suggests that members are continuing to look at changes to the city’s business privilege tax as part of the solution to the city’s financial problems.

According to a report from the Econsult Corporation, the city could raise an additional $20 million in revenue by shifting the balance of the city’s business tax, which has two components -- a gross-receipts portion, which taxes firms on their sales, and a net-income portion, which taxes profits.

The data Econsult provided to Council states that if the gross receipts rate went from .1415 percent to .2 percent and the net income rate went from 6.45 percent to 6 percent, the city could realize $20 million in additional revenue.

Econsult stresses in the report that the data on the BPT is “very preliminary.”

Any change to the current business tax structure would mark a major shift in city tax policy. Since 1995, the city has been making small reductions to the gross receipts tax, which reformers have long criticized for whacking businesses on their sales, even if they don’t make a profit.

Council members Bill Green and Maria Quinones-Sanchez have been reviewing a change in course -- eliminating the net income portion of the tax and raising the gross receipts levy, which they say would be more fair. They argue that the current structure penalizes city-based firms and lets national retailers get away with paying little or nothing.

Sanchez said Council was reviewing the Econsult business tax data, noting that the proposal might work as part of a multi-year plan to reduce net income and increase gross receipts.

"It is something I'm going to advocate very strongly that we look at," Sanchez said. "I'm hopeful that over the next couple of weeks we will decide if this is a viable option."

The report confirms that the city budget hole is between $130 million to $140 million – close to Mayor Nutter’s statement that the city must plug a $150 million gap. The Econsult report also recommends that Council look at possible expenditure cuts of between $40 million to $60 million.

Nutter proposed an annual $300 per household trash fee and a 2 cent per ounce tax on sugary beverages to close the budget gap. The “soda tax” – which the administration is also billing as a public health initiative -- would be charged as part of retailer’s business tax and they could pass it on to consumers.

Already, Council seems to have rejected the trash fee plan. Many members prefer a proposal by Councilman Frank DiCicco to raise property taxes by 12 percent, which would raise the same amount of revenue.Council has also raised concerns about the soda tax, which has drawn harsh criticism from soft drinks manufacturers, teamsters and retailers, who argue that the tax could cost jobs and may not be directly passed on to soda anyway.
 
Posted by Catherine Lucey @ 1:27 PM  Permalink | 5 comments
Comments   
  • 0 like this / 0 don't   •   Posted 2:38 PM, 04/14/2010
    6%? and across city line there's a 0% net profits tax and no gross receipts tax. a property tax hike on broken assessments? what a bunch of jokers
    — dreinterests
  • 0 like this / 0 don't   •   Posted 2:57 PM, 04/14/2010
    This is not a "change" to the business tax. This is an increase in the business tax. To term the title of the article as merely a change is to hide the fact that this hurts business in Philly, and incentivizes business to leave or certainly to keep their corporate head quarters out of Philly if at all possible. The gross receipts tax is a tax on the receipts of the business before costs are taken out, so the business could lose money and owe taxes. This is hugely disincentivizing to start ups and technology transfers associated with Universities. It is a tax that uniquely hurts both business and universities that own patents start ups need.
    — CleanupPhilly
  • 0 like this / 0 don't   •   Posted 2:58 PM, 04/14/2010
    The city is owed $500 million in overdue property taxes, and the overwhelming bulk of that lien debt is against valuable property that can pay all of the lien debt once the property is sold at sheriff sale. There is no way for Philly to keep pretending that it can raise business and property taxes without collecting what has already been levied while property taxes were lower. Why won't the press cover this?
    — CleanupPhilly
  • 0 like this / 0 don't   •   Posted 3:00 PM, 04/14/2010
    The city is owed $1 billion in forfeit bail, and the city to engage private contractors to collect this money, such as bonders who do that work.
    — CleanupPhilly
  • 0 like this / 0 don't   •   Posted 3:04 PM, 04/14/2010
    Additionally, the city is a remnant of ineffective government held property, such as by the city itself, the RDA, and PHA. PHA, for example is the fourth largest landlord in the state, and is entirely in Philly. That footprint where PHA pays zero in property taxes is not sustainable. Where PHA holds property it cannot develop and has not renovated, it must be compelled to sell this property. Here are some vacant properties in my neighborhood that PHA should sell, along with some properties that have recurring drug and crime problems PHA management can't solve, so the properties should be sold to minimize PHA's failing properties. Each property once in private hands would gain the city thousands per house in new property tax revenue. This is how to grow the property tax base, and must be part of Nutter's strategy to succeed, not just raising business taxes. Take a look and tell me if this is viable, healthy, successful public housing that should remain, or if PHA should cut it's losses: http://www.youtube.com/results?search_query=pha+blight&search_type=&aq=f
    — CleanupPhilly


5 comments
About The Philly Clout Team
PhillyClout
Chris Brennan, a native Philadelphian and graduate of Temple University, joined the Daily News in 1999. He has written about SEPTA, the Philadelphia School District, the legalization of casino gambling, state government, the mayor, the governor, City Council and political campaigns.
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David Gambacorta spent a small eternity writing about cops, drug dealers and serial killers. Now he’s writing about power and politics ­– which sometimes reminds him of the old crime beat. He joined the Daily News in 2005. And yes, he knows you’re not quite sure how to pronounce his last name. E-mail tips to gambacd@phillynews.com
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Catherine Lucey joined the Daily News in 2002 and has written about murderous drug gangs, political protesters and Harry Potter. After covering the 2007 mayoral election, she moved over to the City Hall bureau where she has been reporting on the Nutter administration.
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Jan Ransom, a native New Yorker, joined the Daily News in 2010 after graduating from Howard University. She has since written about the difficulty of filing police complaints, tax deadbeats and life after violent home invasions. She joined the Daily News City Hall Bureau in 2011 and has plunged headfirst into reporting on administration budget battles and City Council shenanigans.
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Catherine Lucey
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Chris Brennan
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Jan Ransom
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