COMMITTEE ON LEGISLATIVE OVERSIGHT
PHILADELPHIA CITY COUNCIL PUBLIC HEARING
Wednesday, February 21, 2018
City Hall, 1401 John F. Kennedy Blvd., Philadelphia, PA 19107
Testimony by: Darrell Davis, Manager of Local Government & Civic Affairs, The Chamber of Commerce for Greater Philadelphia
Good afternoon, Chairman Johnson and members of the Committee on Legislative Oversight. I am Darrell Davis, Manager of Local Government & Civic Affairs at the Chamber of Commerce for Greater Philadelphia. Thank you for the opportunity to testify on Resolution 170942.
The Chamber’s mission is to attract, retain and grow jobs for the city and region. We follow principles of economic competitiveness to guide our public policy. We believe that government at all levels must operate in an efficient way to maximize the services that it provides, and the Chamber will work with other organizations to advance an agenda leading to economic growth and prosperity.
Government must be conscious of the overall cost of doing business — taxes, fees, insurance, regulatory expense — so as to provide a competitive business environment. Our region should strive to provide efficient services with the lowest possible tax rates. Taxes should be broad-based and not target a particular industry segment and need to be shared equitably between business and citizens. To foster this atmosphere, it is important that government policies enhance our competitiveness rather than handcuff job and wealth creation.
In 2003, The Tax Reform Commission provided the City with a 10-year plan to reform the tax system by offering targeted recommendations to increase the city’s overall competitive edge. Key recommendations included accelerated wage tax reductions, reforming the business privilege tax (currently BIRT), and amending real estate taxes, all without reducing necessary services the City provides. Since the release of the Commission’s report over 14 years ago, the City has taken steps to do the following with regard to local tax reform:
- Separated the property assessment and appeals process
- Implemented measures to help establish accurate land and improvement values
- Start the process to eliminate fractional assessments
- Expanded efforts to address property tax “ability to pay” issues by establishing the LOOP program
- Making technical changes with regard to the Realty Transfer Tax
- Eliminating the Real Estate Non Utilization tax
The Chamber has worked with past administrations and City Council to enact these measures; however more must be done to improve the tax structure and overall competitiveness. Currently, City Council and the mayor have the power to set local tax rates, and the Chamber believes a first principle of local tax reform is that any action continuing these pro-growth reforms should first be taken locally — by Council and the Mayor. As we strive towards local tax reform, we will continue to work with local officials to do the following:
- Real estate taxes: Relative to the suburbs and to other cities, Philadelphia’s real estate taxes are low. Philadelphia’s property tax is 66% of suburban Pennsylvania median. As a matter of tax policy, as recommended by at least two City tax policy groups, real estate taxes could be increased. Politically, however, such tax increases are difficult to enact because of the impact on residential property, particularly low-income residential property owners. In order to help implement this agenda, the Chamber would support real estate tax increases, with the impact of those increases on residential properties ameliorated by: (1) Adding to the exemptions/waivers that currently protect residential property owners, like the homestead exemption. With regard to the FY 19 budget, the Chamber will not support significant and disproportionate local tax increases on employers to address budget shortfalls.
- Wage and business taxes: Wage and business taxes remain uncompetitive — as compared to other cities and the suburbs. Philadelphia’s wage tax is almost 4 times the regional median. BIRT has no suburban counterpart and adds 20% to 30% premium. They are also the most demonstrable barriers to economic growth. As a matter of tax policy, as recommended by at least two City tax policy groups, wage and business taxes must be reduced — and at a rate faster than that set forth in the current Five Year Plan. These reductions are valued at a cost of $214.6 million in the Five Year Plan. The Mayor and City Council should build into the Five Year Plan reductions in the wage and business taxes in Philadelphia funded with the increased real estate tax revenues generated pursuant to paragraph above.
- U&O and Parking tax: The Mayor and City Council should agree not to raise U&O tax rates, in addition to lowering the current parking tax rate from 22.5% to 15%. There is a link between rising commercial property values and the amount of use and occupancy tax due per tenant. In 2012, City Council voted to raise the U & O tax on businesses in Philadelphia by 19 percent — a $20 million increase. We strongly believe that another increase is economically counter-productive and can and will encourage businesses that can move to do so. When a narrow slice of our citizenry – office building tenants – are asked again to shoulder the burden for a broad-based public need — adequate funding for education – we must object. Another increase in the U & O tax sends a signal to job creators that our city is not open for business. The message to tenants in these properties is that Philadelphia has suddenly become a more expensive place to do business.
Thank you for the opportunity to testify on Resolution No. 170942. We are happy to continue serving as partners in guiding legislation so as to best effectuate a policy’s intent especially as it relates to the local tax structure in Philadelphia.