Mayor Nutter wants to hike taxes on booze and cigarettes as a way to raise money for schools, but City Council is skeptical that state enabling legislation will come through in time for it to pass a budget by June 30.
Today, Council s Committee on Finance approved an alternative plan sponsored by Councilwoman Maria Quinones-Sanchez which would raise an extra $30 million for schools by increasing a business tax known as the use-and-occupancy tax.
"We don t know what [the state] is going to do, but we can t wait for Harrisburg to decide at the end of June, " Quinones-Sanchez said.
The Nutter administration and the Philadelphia Chamber of Commerce opposed the bill.
"We do not want to increase the U&O again after having increased it substantially last year," said city finance director Rob Dubow. "The increase proposed in this bill would amount to close to doubling the amount of the tax in just two years. We believe that would send a bad message to businesses. "
But under the Actual Value Initiative there will be a shift in the tax burden from commercial to residential properties. Large commercial properties are set to see huge decreases to their tax bills under AVI and Quinones-Sanchez has said her bill could collect some of that revenue.
Meanwhile Councilman Wilson Goode Jr. added that with $320 million in business, wage and other tax cuts over the course of the five-year financial plan big commercial properties could stomach an increase to the U&O tax.
Councilman Bill Greenlee said "in poor choices we would not like to have, at least this is under our control."
Additionally, the bill provides relief for small businesses expected to get hit hard under AVI by exempting the first $2,000 from the tax. Quinones Sanchez amended the bill by lowering the rate to 1.4 percent. The U&O tax currently goes directly to the school district, but Quinones-Sanchez bill would create a city portion of the tax.
Sixty-nine percent of commercial properties would see their tax bills drop under Quinones-Sanchez plan while 31 percent mostly big commercial properties would see their bills increase. Nutter had proposed maintaining the current rate of the U&O tax and under his proposal 82 percent of businesses would see spikes to their tax bills.