Report: Philly leads in business tax breaks
Among the nation's largest cities, Philadelphia offers the most business tax breaks, forgoing more than $200 million a year in revenue as a result, a study by the Pew Charitable Trusts found.
Among the nation's largest cities, Philadelphia offers the most business tax breaks, forgoing more than $200 million a year in revenue as a result, a study by the Pew Charitable Trusts found.
The report, released Thursday, looked at business tax incentives and exemptions between 2001 to 2003 and 2010 to 2012, the most recent complete set of tax data. It determined that between 2010 and 2012, the city forgave an average of $110 million annually in business incentives and $106 million in industry tax exemptions. The city's yearly budget is about $4 billion.
"Whether these tax expenditures have paid off for Philadelphia is hard to say," the report states. "There is no question that there have been benefits, in terms of jobs created and buildings constructed. The issue is whether those benefits outweigh the costs."
Since 2002, the city has added several incentives and exemptions, bringing the total business tax-reduction programs to 21. Eight of those programs took effect after 2012 and were not evaluated in the Pew report.
Nevertheless, Thomas Ginsberg, project manager of Pew's research initiative, who edited the report, said the number of programs was "notable" compared with other cities'.
Mike Dunn, a spokesman for Mayor Kenney, said: "While it is difficult to determine with exact certainty what economic growth would have occurred without the incentives, we feel confident that at least a considerable portion of the city's recent economic gains would have been impossible without them."
The report references city Finance Director Rob Dubow's saying that a high demand for city services results in increasing tax rates for businesses and residents. (As the report points out, Philadelphia has one of the highest tax burdens in the country.) "To attract business, we have to compensate," Dubow is quoted as saying.
The tax incentives and exemptions range from the 10-year tax abatements on new or substantially renovated commercial, industrial, and residential construction to environmental-protection tax credits.
While the tax abatements have been the subject of numerous reports over the years, often with conflicting conclusions, the city has not done a full analysis of all of its tax incentives and exemptions, the report said.
According to the report, only New York and Washington offer comprehensive reports to the public each year on their business tax programs.
Ginsberg said the city's Revenue Department submits annual reports to the mayor and City Council on the aggregate amount of forgone revenue for six tax-credit programs for which reporting is required.
The reports, described as little as one page sometimes, include a description of the program, the number of applicants and the value of credits issued, according to Pew's review.
The reports are not required to weigh whether the credits are having the desired impact.
"Philadelphia's finance director said the city has not attempted to quantify the value of these exemptions - or determine their efficacy - because the emphasis of the past three mayoral administrations has been to reduce the business tax burden," the report states.
While Ginsberg said he and his team were not "telling anyone what to do," the report concludes: "Knowing how much these tax exceptions cost, and whether they are meeting their goals, is a key component of a coherent and equitable city tax policy."
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