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Heard in the Hall

Wage Tax hike dead for now

Philadelphia City Hall and political coverage from the Philadelphia Inquirer City Hall bureau.

29 comments

Wage Tax hike dead for now

POSTED: Thursday, April 30, 2009, 2:32 PM

Jeff Shields

A City Council Plan B proposal to raise wage taxes instead of property taxes to solve the city’s $1.38 billion, five-year budget hole is “off the table,” officials said Thursday.

Finance Director Rob Dubow informed Council that the city did not meet the criteria in state law that would allow Council to raise wage taxes without state approval. The law governing how state casino proceeds are distributed for tax relief states that Philadelphia cannot raise its wage tax unless revenues dropped 2 percent or more, as certified by the citys finance director.

That clause prevents the city from using state gaming proceeds to pay for government services and blocking the intent of the 2004 gaming law, which was to provide wage tax reductions to Philadelphia and property tax relief to other areas of the state. The 2 percent gives the city leeway in a financial crisis. But even in the current economy, Dubow said the expected revenues for the year ending June 30 fell by 1.94 percent, from $2.74 billion to $2.60 billion.

“I think the wage tax is effectively off the table,” Republican Minority Leader Brian J. O’Neill said after Thursday’s Council meeting.

Nutter wants to balance the budget with a combination of a three-year, 1-percentage point sales tax increase, with a two –year property tax hike. Property taxes would rise 19 percent the first year beginning in July, going down to 14.5 percent above current levels in the next year and returning to the current tax rate in July 2012.

Council countered this week with its Plan A -- extend the sales tax increase to 5 years and borrow against those revenues to pay bills in the next two years. The sales tax money would eliminate the need for a property tax increase.

But wage tax was also offered as the next-favored, Plan B alternative – Council would freeze the 3.93 percent resident wage tax and raise the wage tax for non-residents. These rates otherwise would decline as gaming revenues continue to fund tax relief.

There was some question about whether Council would accept Dubow's calculation or accuse him of using politics in his calculations. But there is none of that today.

"The numbers are what the nubers are, and I think it was a fair manner the way he did it," said Charlie McPherson, Council's chief financial officer.

Now, with the wage tax idea dead, it appears Council and the administration will haggle out their strategies on the sales* tax. O’Neill said that the two sides have been working more closely this week to come to an agreement on the budget. Council is expected to hire a consultant in the next few days to bolster its arguments.

*corrected from an earlier version that said wage tax.

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29 comments

Comments (29)

0 like this / 0 don't • Posted 2:50 PM, 04/30/2009

Council is expected to hire a consultant in the next few days to bolster its arguments. A partnership of two companies, Econsult Corp. and Keystone Research Center, will be awarded the consulting contract, Council sources said. why do they need to hire a consultant - why can't they figure the numbers out themselves - they have staff out the wazoo...this is why phila cannot reign in costs - they need consultants for everything -instead of working their bloated staffs... the only reason to hire consultants is for political payback - and we all know Council is above that

— gogglespaisano

0 like this / 0 don't • Posted 2:51 PM, 04/30/2009

did they put the contract out to bid - where is Council's transparency?...this is our money

— gogglespaisano

0 like this / 0 don't • Posted 3:05 PM, 04/30/2009

Transparency? City Council's business is as transparent as a block of lead.

— DonQ

0 like this / 0 don't • Posted 3:17 PM, 04/30/2009

Can someone answer me this? Do visiting pro athletes and other performers still get a free pass on the wage tax?

— Ticogringomike

0 like this / 0 don't • Posted 3:17 PM, 04/30/2009

No consideration given to the tax abatement? EVERYONE will share the pain!

— gargom

0 like this / 0 don't • Posted 3:23 PM, 04/30/2009

wow, they wanted to shaft non-residents. I understand the logic but that's the most irresponsible public policy imaginable. If there's any part of the wage tax that damages job growth, it's the commuter tax.

— dreinterests

0 like this / 0 don't • Posted 3:32 PM, 04/30/2009

Did anyone ever notice that two people work while one stands around at City Hall? Looks like their is a lot of pork in the system that can be weeded out (and I voted for Obama). I would think Philadelphia has finance personal employed. They should be capable of working though the numbers.

— tequila00shots

Comment removed.

0 like this / 0 don't • Posted 4:20 PM, 04/30/2009

Speed up the collection on the 10 year tax abatement.

— accountant2

0 like this / 0 don't • Posted 4:25 PM, 04/30/2009

I did the math. The proposed wage tax increase would hit me about the same as the property tax increase, and my property is overvalued. So I'm not sure what the big deal is. For a typical row house owner with a $1,000 annual property tax bill, you're talking an extra $16/month. Why are these fools on Council so opposed?

— dartvader

0 like this / 0 don't • Posted 4:31 PM, 04/30/2009

My mom is a senior citizen on a fixed income. This will increase her property taxes about $25/month. For her that is a lot of $.

— Jeff

0 like this / 0 don't • Posted 4:33 PM, 04/30/2009

All I have to say is thank god I moved to the burbs. I get to enjoy all the benefits of Philadelphia without having to waste my tax dollars on the wasteful spending- of its government. They will get their money one way or another. Notice you don't see any of the council members giving up their wages for a year. They make probably double their ernings in illegal kickbacks and other fringe benefits payed for by you!

— Criz2020

0 like this / 0 don't • Posted 4:36 PM, 04/30/2009

Great! councli will hire their own conusltant and make them come up with a finding that supports their position. What a waste! The numbers are the numbers!!

— dukie

0 like this / 0 don't • Posted 4:37 PM, 04/30/2009

Can we just start a recall campaign for those enlightened creatures in City Council and end our misery? Isn't it time for Charter reform and maybe have more district councilpeople, no at-large, and mid-term elections, not coinciding with the mayoral elections.

— anon

0 like this / 0 don't • Posted 4:42 PM, 04/30/2009

The reason they need the consultants in the first place is because the "hundreds-of-thousands of dollars" DROP-collecting City Council members did not do their job. As PRESIDENT, Anna Verna should be held accountable for this extra expense, ESPECIALLY at a time when the city is crying for money. There is no mention in this article of what that will cost. No surprise there... And "Council countered this week with its Plan A -- extend the sales tax increase to 5 years and borrow against those revenues to pay bills in the next two years. The sales tax money would eliminate the need for a property tax increase." This is a little more fair. At least EVERYONE will pay, and not just property owners or those lucky enough to still have a job... This will only work, however, if the BILLS they are going to pay are kept in check, and we can probably predict that outcome, based on current and past performance.

— dee99999