NOTE: This post has been updated to include some documents from the Nutter administration. Just scroll down to get them.
A fight is brewing over the best way to tax businesses in Philadelphia.
Council members Bill Green and Maria Quinones-Sanchez have introduced legislation that proposes shifting the city's business-tax burden from the net-income tax, which taxes profits, to the gross-receipts tax, which taxes sales.
The council members, who have been working on the legislation for years, argue that this method would spread the tax burden more fairly and remove the disincentive to locate in Philadelphia. Hearings on the legislation are set to start Nov. 30.
In a recent op-ed in the Philadelphia Inquirer, economist Mark Zandi said the Green-Sanchez proposal would be a “positive step” for the city’s economy.
But the Nutter administration has now done an analysis of the plan and argue that it would reduce business tax revenues by $23.3 million a year – and that it would benefit law firms, real estate and manufacturing, while penalizing the construction industry, insurance and hospitality.
The council members say they have worked on an amendment that would prevent construction from being hit with multiple taxes. They also argue that some of the businesses hit harder are not based in the city and that the administration is not counting on any positive growth from the tax changes.
The Inquirer yesterday reported on the building trades organizing against the plan. And the adminstration is today briefing reporters on their analysis, so stay tuned for more details...
UPDATE: Here are the source documents from the administration. This chart shows the predicted impact on business sectors based at the gross receipts rate proposed by the members. This chart shows the impact at a higher rate, which the administration says would be revenue neutral. And this document analyzes who the "winners and losers" are under the proposal.
UPDATE 2: Here is a letter from Green and Sanchez responding to the administration's analysis.