Taxes
Issue discussion
We very much need tax reform in this city. While I believe that other steps are even more important in promoting the economic development of the city, I do think that the Business Privilege Tax (BPT) and our wage tax, especially the wage tax on commuters, undermines the growth of business in the city. However, while selective tax reforms might eventually create new revenues in the city, we cannot reduce taxes in the expectation that economic development—or new efficiencies in government—would occur overnight. And reducing revenues might force us to cut services that are as vital to economic growth as tax reductions. So what we need is revenue-neutral tax reform, not tax cutting. We need to eliminate those taxes that most undermine economic growth while replacing them with other sources of revenue, at least until we generate sustained economic development and job creation. So I propose:
Rapid and revenue-neutral reductions in the BPT with revenues to be made up by
- A shift from a wage tax to a personal income tax (which taxes interest and dividends).
- An increase in the long-term parking tax (so that commuters have an incentive to take public transit rather than drive into the city).
- An increase in the tax on liquor by the drink.
- Increased efficiency in the government by re-engineering every city agency to take advantage of modern management techniques and information technologies, and to reduce the role of political interference in their operations.
Create Regional Development Funds. I would seek to create two regional funds. The first would pay the local share of SEPTA, a sort of tax swap with the suburbs. The second would provide subsidies for arts, cultural, and sports institutions. The two funds would replace all current spending by local governments in these two areas. Both would be paid for by a small increase in either the sales tax or the real estate transfer tax.
In return for the creation of these funds, we can reduce and eventually eliminate the commuter wage tax. Since everyone in the suburbs benefits from SEPTA and our arts, cultural, and sports institutions—if only because they generate economic growth—it is fairer for everyone to pay a small regional tax than for commuters to pay a high wage tax.
This tax swap would encourage many businesses to move into the city. That would not only generate significant increases in tax revenue but, because centralization tends to increase economic efficiencies, would also lead to greater economic growth in the region as a whole.
Repeal the uniformity clause in the Constitution of the Commonwealth to allow the city to create much more progressive taxation. In particular I would:
- Make the wage tax or, if my proposal under 1 is adopted, the personal income tax somewhat progressive.
- Tax commercial property much more heavily than residential property. This has been done in New York City for years. The commercial property tax is a tax on capital that has little effect on the location of businesses.
Gradually shift to a land tax. I would gradually shift from a property tax that taxes both land and buildings equally to one that taxes land much more than buildings. This would reduce property taxes for almost all residences and, by increasing taxes on empty parking lots and other underutilized land, encourage more development in the city.
