Want more jobs in Philly? Reform tax code

By Steven Scott Bradley, Varsovia Fernandez, Paul R. Levy, and Jerry Sweeney

A top priority for Philadelphia's next mayor must be creating jobs. Everyone agrees, but we've lacked consensus on the right path forward.

However, something remarkable has been happening among local business, civic, and labor leaders, backed by municipal finance experts: near-unanimous agreement that our current mix of wage and business taxes impedes job creation.

Put simply, tax rates need to be lowered for residents to prosper, for large and small businesses to expand, and for more firms to locate here.

But the impasse has always been over how to lower those taxes without creating a gap in the already strained city budget.

The best way to do that is to raise revenue from a different source that does not have the same job-killing effect as wage and business taxes. Last week, our group, the Philadelphia Jobs Growth Coalition, launched a public campaign outside City Hall. We put a simple idea on the table:

Increase the property tax rate by 15 percent exclusively on commercial real estate, leave residential rates alone, and dedicate the additional revenues to reduce taxes for all workers and for businesses, small and large. This can be done without opening any gap in the city's budget.

Why would members of the business and real estate community propose this?

Quite simply, because we believe that reversing decline by expanding employment is the single most important goal for the city. We are prepared to make a down payment on growth, investing in Philadelphia to reduce a wage tax that's among the highest in the nation and to cut business taxes that make it 20 percent more expensive to operate here than in the suburbs.

Why do construction and service unions support this?

Because changing the tax structure to create thousands of jobs is not theory. Look no further than New York, Washington, and Boston. None rely as heavily as Philadelphia on taxing what easily moves: jobs and businesses. All rely more on real estate taxes.

Since 1970, those cities have each added tens of thousands of jobs while Philadelphia has lost almost a third of its jobs. Some argue that we are just the victim of manufacturing decline. But our three peer cities also lost their manufacturing base; they just gained many more 21st-century jobs.

Then there's Detroit. It's as dependent on the wage tax as we are, and - you guessed it - its job-loss record looks remarkably similar to ours. Perhaps it goes without saying, but job loss and poverty are directly linked. Among major cities, only Detroit and Memphis have a higher rate of poverty than Philadelphia.

Our city is on the upswing in so many ways. Population is growing, particularly among 20- to 34-year-olds. We boast world-class education and medical institutions that employ thousands of people. We are outpacing many peer cities with a growing force of self-employed individuals. But because they are trying to sell services into a no-growth economy, the number of sole proprietors and minority-owned firms that have succeeded enough to take on new employees lags far behind other major cities.

The comprehensive revisions we are proposing reflect the thinking of both the 2003 and 2009 tax commissions, as well as the 2013 jobs commission. These changes would enable the city to achieve the greatness that we all know it can. By lowering every worker's wage tax below 3 percent over a decade and cutting the business income and receipts tax in half in the same period, we can position Philadelphia for accelerated growth. We can put more residents to work, help small businesses grow, retain a greater share of college graduates, and expand the tax base to support schools.

If we stick with the status quo, jobs will continue to leave, the tax base will continue to shrink, and we will never have sufficient revenues for services or quality schools.

Adding jobs enables us to reduce unemployment, pull families out of poverty, invest in infrastructure, and ensure that all of our neighborhoods directly benefit from the citywide resurgence. We simply need to commit to making Philadelphia a top-five job creator in the United States.

Now is the time for those who seek to be mayor to come together with local political, business, labor, and civic leaders and speak with one voice in Harrisburg. We will need a change in state law to allow commercial property owners to pay a higher rate than residential owners. Not an easy step. It will take two to three years of hard work. But 40 years of declining jobs and rising poverty should be sufficient motivation for all of us to act together.

To learn more about our plan and see the list of supporters, visit www.philadelphiagrowthcoalition.com.