New Report Documents How Philadelphia’s Antiquated Tax Structure Restrains Job Growth and the Reduction of Poverty, While Limiting Funding for Education
PHILADELPHIA (January 30, 2017) – A new report researched and produced by Center City District/Central Philadelphia Development Corporation and released today offers an explanation of how and why the city has lagged in job growth and has one of the highest urban poverty rates, despite more than two decades of vibrant growth and development in Center City and University City.
Philadelphia: An Incomplete Revival documents how Philadelphia’s nearly unique reliance on wage and business taxes to finance the lion’s share of local government has inhibited job creation across the city, pushed residents to the suburbs, shortchanged schools and resulted in the highest poverty rate among the nation’s 25 most populous counties. While peer cities such as New York, Boston, and Washington, D. C. have forged ahead, replacing jobs lost to de-industrialization and surpassing their 1970 employment levels, Philadelphia still has 26% fewer jobs than it had in 1970 and has not yet regained its 1990 job level. The report suggests that a plan for comprehensive tax reform offers a path to more robust, inclusive and citywide growth.
Last summer, both the Pennsylvania House and Senate overwhelmingly passed HB 1871, a bipartisan effort that will provide Philadelphia with the flexibility to assess properties used for business purposes up to 15% higher than residential properties, so long as all the incremental revenues raised are used to lower the City’s wage and business taxes.
The constitutional amendment, if passed again in the current session in Harrisburg, will provide a framework that enables Philadelphia to implement the recommendations of two previous tax commissions, while ensuring no gap opens in the City’s budget. The goal is to get the wage tax below 3% for the first time in 50 years and cut the net income portion of the Business Income and Receipts Tax (BIRT) in half. This can lower barriers to employment growth, reduce poverty and help Philadelphia participate in the more dynamic job growth that most major cities already are enjoying.
The 12-page report, Philadelphia: An Incomplete Revival, provides a brief history of how Philadelphia became one of the few major American cities to have such a major dependency on a wage tax. It notes how different Philadelphia’s method of financing local government is from that of our major East Coast peers, which have all rebounded from their decline in the 1970s and now have more jobs than they did before de-industrialization, while Philadelphia still has 26% fewer jobs than it did in 1970.
The report highlights how this has resulted in an underfunding of public education, which limits our ability to retain millennials as they become parents, as well as the ability of lower-income families to have access to high quality schools. Finally, the report notes the relationship between the high percentage of working city residents who are reverse commuting to the suburbs, the steady out-migration of working-class and middle-class residents and the effect on the city’s poverty rate.
To read the 12-page report, Philadelphia: An Incomplete Revival, accompanied by colorful maps, photos and charts, please click here.
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The Center City District, a private-sector organization dedicated to making Center City Philadelphia clean, safe and attractive, is committed to maintaining Center City’s competitive edge as a regional employment center, a quality place to live, and a premier regional destination for dining, shopping and cultural attractions. Find us at www.centercityphila.org and on Facebook and Twitter.