Biz-tax proposal on the shelf for now

Posted: December 15, 2010

A proposal from two freshman City Council members to radically change the way the city charges business taxes has been put on ice.

A hearing today on legislation from Council members Bill Green and Maria Quinones-Sanchez has been postponed as the duo agree to work on a compromise plan with the Nutter administration.

"We wanted to allow for more dialogue with the administration, more time to brief and have conversations with our colleagues," Quinones-Sanchez said.

It did not appear that the Council members had the votes to move the legislation out of committee after strong opposition from the administration. Members of the administration met with Green and Quinones-Sanchez this week to work on a compromise.

As a result, Clay Armbrister, Nutter's chief of staff, sent a letter to Green and Quinones-Sanchez yesterday, pledging to work together on legislation that would help small businesses and reduce the disincentive to locate in the city - two of the Council members' top concerns.

"Our main concern with your bill is the damage we believe would be caused by quadrupling the gross receipts tax rates," Armbrister wrote. "We remain committed, however, to working with you to produce business tax legislation we can all support."

No exact time frame was given in the letter, but Quinones-Sanchez said she'd like something to be worked out before the budget process begins, which is typically in March.

The legislation would shift the business-tax burden from the net-income tax, which taxes profits, to the gross-receipts tax, which taxes sales. The Council members have argued that the legislation - which would exempt a business' first $100,000 in sales - would benefit city-based companies and small businesses.

During two marathon days of hearings on the plan, the Nutter administration opposed it, stating that it would raise taxes on many of the city's largest firms and could damage the job-creating hotel and construction industries.

The net-income tax is set at 6.45 percent of profits, and the gross-receipts rate is about $1.45 for every $1,000 in sales. Green and Quinones-Sanchez argue that getting rid of the net-income tax and shifting to a higher gross-receipts rate would provide tax relief for small businesses and remove the disincentive for businesses to locate in the city, because the net-income tax is charged only to city-based firms.

In his letter, Armbrister listed several items the Council members and administration would work on together, including tax relief for small businesses, changes to the tax code that would reduce the disincentive to be in the city, advocating changes to state law that could close tax loopholes and reconsidering the balance between the net-income and gross-receipts taxes.

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