DN Editorial: STILL TINKERING: Despite 2 commission reports on taxes, no coherent policy

Posted: April 05, 2012

"W E envision a tax structure that is fair and simple, real-estate taxes that reflect the true value of property, lower taxes on personal income, and an elimination of onerous business taxes on sales and profits."

That's a quote from the Final Report of the Philadelphia Tax Reform Commission - a report published in 2003, nine years and two major tax reports ago.

In 2003 and again in 2009, business leaders, experts and others spent time studying and analyzing the city's tax structure; both groups issued reports remarkably similar in their agreement that Philadelphia's taxes are too high, badly structured and unfair. They agreed that the city should correctly value its property to enable it to collect more in taxes as values increase, as well as reduce business and wage taxes, because those taxes create a disincentive for companies to locate here.

The clear message was that comprehensive and strategic revision of the entire tax structure should win out over piecemeal tax amendments.

So, why are city leaders still tinkering at the edges? A new bill passed last month, authored by Councilman Bill Green, exempted private investment firms and hedge funds, and their managers, from paying business taxes.

As a result, two firms are likely to relocate here. But what the bill signals is that rather than building a fair and simple system to help the city grow, we're still - nine years after the first tax-reform commission - putting Band-Aids on a mortal wound.

Green and Councilwoman Maria Quinones-Sanchez did introduce a more comprehensive business-tax overhaul two years ago, parts of which were passed.

And after years of delay, the city is now finally on a path toward correctly assessing the value of property - though a delay on implementation seems likely.

But a schedule for reducing wage and business taxes has been delayed. The city froze planned reductions when the recession left the city budget in tatters; they'll resume next year.

The problem with the hedge-fund exemption is not the fact that it favors the One Percent, or even that it gives up revenue. (No firms covered by this bill are currently paying business taxes.)

The problem is what it does to the integrity the city was trying to build into its tax system. What Philadelphia needs is a competitive tax structure with a level playing field, not breaks for companies that agree to come here if they get special treatment. Those breaks aren't fair to the companies already in Philadelphia, paying taxes. They put the city in a difficult negotiating position with other companies that may want to come here. And they don't get us any closer to a rational tax code.

It's not that the city should avoid any action on taxes until it can overhaul the whole code. But changes should be part of a single, coherent policy - and on some shelf, there are two fat reports that detail how.

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