Report: Tax burden on Philly residents has decreased compared with burbs

Posted: September 21, 2012

PHILADELPHIA has a reputation for taxing its residents so much that they flee to the suburbs.

Yet a Pew Charitable Trusts report released Wednesday shows that the city's residential tax burden dropped in the past 12 years.

At the same time, several New Jersey and Pennsylvania suburbs hiked taxes, which made the city more competitive with surrounding towns.

As for the tax burden of Philadelphia residents compared with that of suburbanites who don't work in the city, Philly went from having the region's third-highest burden in 2000 to the 48th-highest in 2012, according to the report.

"Philadelphians are still more heavily taxed than most of their suburban peers," said Thomas Ginsberg, lead author of the report. "But the tax gap between the city and the suburbs as a group has shrunk dramatically."

Ginsberg stressed that the findings are based on taxes paid by a hypothetical family making $60,000 annually, so they don't apply to everyone. The study also didn't examine business taxes or the quality of government services.

In 2000, 13.5 percent of that Philadelphia family's income went to state and local taxes. In 2012, that dropped to 12.9 percent.

How did things improve for Philadelphians? First, the city lowered its wage taxes between 2000 and 2009. Second, Philadelphia's property assessments didn't keep up with rising home prices, so the city's effective property-tax rate dropped. According to the report, a Philadelphian's effective property-tax rate was 46 percent lower in 2012 than a suburbanite's.

"Our research certainly shows that the property-tax system in Philadelphia, and the state of, perhaps, trouble that it's gotten into, was absolutely a major driver in the city's shrinking tax burden," said Ginsberg, a former Inquirer reporter and editor.

Many of the city's property assessments are inaccurate. Last spring, Mayor Nutter proposed overhauling the property-tax system by reassessing all real estate in Philadelphia. City Council decided to delay the plan - known as the Actual Value Initiative (AVI) - for a year.

Mayoral spokesman Mark McDonald said that the Pew report is good news for the city but that it's not time to declare victory.

"I think we have a lot of work yet to be done in terms of reducing the tax burden," he said. "We continue to want to see wage and business taxes decline."

McDonald said the city also is still working to fix its property assessments.

Councilman Bill Green argues that AVI would shift more of the property-tax burden to homeowners from commercial and industrial owners. That would change the overall residential burden that Pew studied, Green said.

"That will make it slightly less favorable," said Green. "Hopefully the basic finding will remain the same."


Holly Otterbein writes for It's Our Money, a joint project of the Daily News and WHYY funded by the William Penn Foundation that works to shed light on where your tax dollars are going.

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