If you haven't seen it, check out this fantastic debate going on over at Young Philly Politics.
YPP contributor Ben Waxman wrote a critique of Nutter's proposal to eliminate the Business Privilege Tax (N-U-T-T-E-R) in the City Paper to which Nutter responded a week later.
If you read the comments following Ben's YPP post, you get a great overview of at least one of the ways that Nutter supporters and opponents are attempting to define the so-far-only-declared candidate for mayor. You can also see both sides of the BPT debate. I'm no expert, but it seems a safe bet that Nutter's opponents will use many of the same rhetorical points that Sam Katz's opponents used.
Expect Nutter to be painted as a one-trick pony (that trick being tax cutting) and then for his opponents to say that his plans to cut taxes will lead to harmful cuts in city services. They'll mute Nutter's attempts to say that reductions in taxes will cause new business to come to Philadelphia to provide jobs for the unemployed by saying that the cuts in city services will make the city less attractive to such businesses. Therefore low-income families will get the double whammy of having supportive services pulled out from under them AND be left with even fewer job prospects. If left unchecked, Nutter's opponents will extend this further and say that his idea will lead to massive layoffs, privitization, wage cuts, trash being left to rot, human sacrifice, dogs and cats living together - mass hysteria.
If his opponents are successful, Nutter, while he may retain the support of the business community, will lose the support of liberals and most lower income people. Without them, his support among the business community and many good government types - good government being an issue that, while it may move the masses for a ballot question, isn't quite sexy enough to attract them to a candidate - will not be enough to overcome the geographical, union, and party machine support enjoyed by some of the other candidates.
Nutter's supporters will point out that the gross receipts portion of the BPT taxes businesses even if they lose money, forces them to double pay in the first year and is especially harmful to the kind of small and start up businesses that employ so many people outside of Center City. They'll trot out his 12 years of experience on City Council, tell you he's a really smart and thoughtful guy, that he has a great sense of humor, cured cancer and can time travel.
Can someone clear something up for me? Does the state requirements of tax uniformity prohibit the city from taxing businesses of different sizes (with different revenue or net income levels) at different rates?
Question 2. If the BPT were totally eliminated, what city taxes would businesses pay besides property tax (not counting wage tax)? The reason for my question, it seems reasonable that the net income of a business, its profits, should be taxed or am I missing something?
Comments (5)
Answer to question one: the state taxes businesses of different sizes at different levels, based on the number of shareholders (over 50 shareholders pay about 10%). Given this, I think the answer is that, in theory, the city should be able to tax at different rates. However, the uniformity requirements is generally used more as a political tool than anything actually useful, so reality may be different.
Answer to question two: state taxes, for starters.
Posted by person | August 26, 2006 11:41 PM
I realize that business would still pay the state taxes (capital franchise tax? corporate income tax?) but according to Rendell's campaign ads, even those taxes have been lowered.
I guess my question is, is there an advantage to be located within Philadelphia for which businesses should pay? Again, I'm pretty sold on the arguments that the gross receipts tax should be eliminated (at least for small businesses and supermarkets) but it doesn't seem unreasonable to me that businesses pay some tax on their profits.
Posted by Dan | August 28, 2006 11:22 AM
One more point... the other day my boss handed me materials that he got from a meeting with Pennsylvania's Secretary of the Budget, Michael Masch. Included in the materials was a report from the Tax Foundation, which on first glance with no further research seems to be one of those conservative, anti-tax groups. In it, Pennsylvania is actually rated fairly well as far as State Business Tax Climates - #16. The top five, however, are: Wyoming, South Dakota, Alaska, Florida and Nevada. The bottom two are New Jersey and New York. Aside from Florida, it seems like the most "business friendly" places are also places where no one lives. New York City probably has more people than Wyoming, South Dakota, Alaska and Nevada combined. So really, does it matter how much the taxes are so long as we do the other things that make Philly/Pennsylvania a desirable place to live?
Posted by Dan | August 28, 2006 11:29 AM
I don't have moral objections to corporate profits being taxed, if that's what you're asking. However, I think it may be in the city's fiscal interest not to do so (or at least to do so at a significantly lower rate than it currently does). The issue of local competitiveness (the suburbs are experiencing healthy job growth while Philadelphia languishes) are merely logical and can't be proven in any concrete fashion (at least not in the amount of space I have available here) but here are some observations on the subject.
1) Only about 9% of Philadelphia's total $3.4 billion or so in revenue comes from the BPT* While this doesn't prove that, if lowered, businesses will come to the city, it does highlight the extent to which businesses are not locating in Philadelphia and contributing to its revenue stream.
2) The fact that such a small portion of the city's budget comes from the BPT also means that the city can afford to make a significant reduction in its rates without losing a very large amount of income. This is especially true since the city supposedly had a ~$200 million "surplus" this year. The fact that none of that "surplus" was used to lower taxes shows that the issue simply isn't a priority for this administration (and, depending on who you are, your comments may possibly suggest the complete opposite).
3) Despite the fact that there's a residential construction boom in the city and skilled labor is moving in (not to mention the city's 6 major educational institutions), the city continues to lose jobs and has a glut of empty office space right in the center of its downtown (Isn't half of Liberty II scheduled for conversion into condos?).
4) Take a look at the types of jobs available in Philadelphia: they're mostly service jobs. Want a job as a chashier, waiter/waitress, bank teller, etc? Chances are you won't have too much trouble finding one. Want a job in an industry like information technology? Might as well start looking in King of Prussia or Great Valley because you probably won't find a job in Philadelphia. If you think about this, the service jobs are forced to locate in the city because they _serve_ the city's residents (I.e. they must come in face-to-face contact with them). Many other jobs, mostly white collar ones, can easily locate any place they want to, and are doing so in the aforementioned suburban locations where, I believe, they pay no taxes at all.
5) Speaking of uniformity requirements, one of Philadelphias problems, ironically, is uniformity -- or lack thereof. A glaring exception to the white collar jobs rule are law and architectural firms. Part of this exception may be due to the fact that these jobs require more face-to-face interactions than others. However, I've heard rumours of special exceptions in the city's tax code that benefit them (the state constitution only requires uniformity within the same "class" of people or businesses, and there appear to be plenty of "classes" both at the city and state level). The lack of uniformity also extends to the city's building and zoning codes which, in addition, appear to be arbitrarily enforced, but that's a subject for another discussion.
6) Which brings me to the KOZ designations of the Concast and Cira Centers. It's alleged that these would not have been cost effective to build if it weren't for the KOZ status. I've also heard that most of the large businesses with a presence in Philadelphia have received special tax treatment in order to retain them. I don't remember the specifics, but I think a couple of them were in the paper shortly after I moved here in 2003 (their leases on downtown real estate were all expiring right around that time, if I remember correctly).
7) Before somebody tells me that Philadelphia doesn't need "white collar" jobs, consider this: most of my neighbors here in West Philadelphia have blue collar jobs. After speaking to a few of them, it appears to be a recurring theme for them to have kids who got college educations and moved out of the city immediately afterward for jobs. Are these people no longer important to the city's leaders once they move up from being "working poor" to young professionals? Based on my observations, I think that this is a major cause of blight and abandonment in the city's neighborhoods. These kids didn't want to stay because they couldn't find jobs and/or didn't feel they were getting as much as they should from the taxes they were paying. Then, as their parents retire or pass away, their childhood homes are slowly going to waste. Philadelphia might have been able to naturally transition from predominantly blue collar to predominantly white collar if the city had the foresight to address core issues instead of merely treating symptoms with more and more social services.
8) Finally, what else would you propose doing to "make Philly/Pennsylvania a desirable place to live"? Have Philly/Pennsylvania been doing any of these things? I can think of some, but not very many of them appear to be getting addressed.
(*) From the City of Philadelphia Fiscal 2006 Operating Budget in Brief
Posted by person | August 28, 2006 11:11 PM
Wow! this cartoon type YouTube video I have seen when I was in primary level and at the moment I am in institution of higher education and viewing that over again at this place.
Posted by best car | January 18, 2012 2:53 PM