Budget still has tax cuts, but smaller than planned

Posted: May 13, 2008

Mayor Nutter and City Council are close to striking a deal on a budget with slightly less aggressive tax cuts than originally planned.

In a revised budget and five-year plan under discussion, cuts to the wage tax and business-privilege tax have been reduced, sources told the Daily News.

The $4 billion budget could be introduced for a preliminary vote at the committee level tomorrow, insiders said. Final passage could then happen next week.

Nutter yesterday would not talk in detail about the negotiations, but he did say that he was committed to continuing tax cuts.

He added that the "size of reduction, pace of reduction, all of that is a function of the larger conversation."

The changed tax plans come after the Nutter administration told City Council that the declining economy was affecting revenue projections.

In the latest version of the five-year plan, the wage tax will decline to 3.6 percent for residents and 3.25 percent for nonresidents by 2013. Those numbers include wage-tax relief from the city's share of state gambling-tax revenues.

The original five-year plan presented by Nutter projected rates of 3.5 percent for residents and 3.1 percent for nonresidents by 2013 - if the gambling-tax revenues were included.

Currently city residents are taxed at 4.2 percent and nonresidents at 3.7 percent. So the new version still plans to pare down the rates, but not by quite as much.

On the business side, the gross-receipts portion of the business-privilege tax would be eliminated in 10 years, instead of the originally planned eight.

And the net-income portion of the tax would be reduced to 6.25 percent by 2013 - not to 6 percent as originally planned. Still, this is the first ever reduction to the net-income tax.

While running for mayor, Nutter promised to eliminate the gross-receipts portion of the business-privilege tax within five to seven years. And he promised to bring the wage tax down to 3.25 percent for residents and nonresidents by 2015.

Additional spending was added to the updated version of the plan, including more money for the Art Museum, for the Robin Hood Dell and the school district, as well as more funds to City Council for staffing.

The administration told Council two weeks ago that the slowing economy had changed its revenue projections. In the new plan, the city estimates $12 million less a year in revenue from the real-estate-transfer tax.

And they push back the expected timeline for the millions in "host fees" that the city expects for the two casinos. Now, they plan to get that money in 2012, instead of 2010.

The administration and Council also are talking about delaying a wage-tax cut for the working poor so that it will start in 2014, not 2013.

That tax cut - championed by the late Councilman David Cohen - already has been pushed back once, from 2010 to 2013.

Nutter's original five-year plan got rid of the tax cut altogether. *

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