Inquirer Editorial: Council moves ahead on business-tax reform

Political and corporate opposition hasn't crushed the resolve of a pair of freshman City Council members to retool the city's onerous business taxes.

After three years of meetings and compromises, the tenacity of Bill Green and Maria Quiñones-Sánchez is paying off.

The bill, passed last week, exempts firms from paying business-privilege or net-profits taxes on their first $100,000 in gross receipts. It also moves the city toward taxing only goods sold in the city, an incentive which may attract companies to locate here and hold onto those selling their wares outside of Philadelphia.

Add to that passage of Councilman James Kenney's bill, which aids start-ups by cutting initial fees and rewards them for hiring Philadelphians, and the city looks like it is serious when it says it's open for business.

None of this happened quickly or without intense negotiations.

Sánchez and Green initially wanted to hike the gross-receipts portion of the business-privilege tax and cut the net-profits tax. They aimed to shift the tax burden to companies based outside the city and attract profitable companies into the city.

Their proposal drew opposition from Mayor Nutter and the Greater Philadelphia Chamber of Commerce. The mayor was concerned that it would hurt revenues in a recession. Others said it would damage some businesses while helping others.

But the two Council members persevered and won the mayor's support by agreeing to phase in the tax cuts over time. To protect city services, the administration would curtail a planned cut in the gross-receipts tax, scheduled for 2014, but it would continue to cut the net-income tax at a slower rate than planned. The chamber supported the revised bill.

The bills give businesses relief worth about $50 million, a significant cost to the city treasury. Sponsors, though, argue that increased employment not only would add to the city revenue base but also lower the costs of caring for the unemployed.

This hard-fought compromise should herald a collegial relationship between the mayor and Council in the next term. They'll need to work together, because the city will likely face many of the same economic challenges that weighed on it over the last four years.