Council nears major reforms to business-tax structure

Posted: December 13, 2013

CITY COUNCIL is closer to making sweeping changes to how the city taxes all businesses, in an attempt to attract and retain firms within the city limits.

A bill aiming to sweeten the pot for businesses looking to move and stay within the city of Philadelphia made headway in City Council yesterday when it moved out of committee, although it may be months before it goes to Council for a final vote.

The bill, introduced by Councilman Bill Green, would eliminate the net-income portion of the Business Income and Receipts Tax (BIRT) in exchange for increasing the gross receipts tax - a move Green says levels the playing field for all Philadelphia-based businesses selling goods in the city. The bill passed out of committee yesterday by a 6-2 vote.

"The losers under the current policy are the people located here," said Green.

"We have done analysis and we know it will create jobs. Analysis is just one more economist applying tax policy that is simple, broad-based. Low tax rates will help the city grow."

Green, chairman of the Committee on Finance, said the bill encourages competition and intends to stimulate the city's economy by creating jobs and incentives for business owners to stay local.

A form of this bill was introduced three years ago. Critics say the measure hurts low-profiting businesses on the map.

"The simple analysis is that the bill creates winners and losers, and we don't know the percentage of winners and losers or how this impacts the city's economy," said Councilman Wilson Goode.

"We need more data on this before we make such a drastic change."

Green pointed to examples of businesses just outside the city limits that benefit from migrating and doing business there. He said that is why many businesses just across City Avenue in Bala Cynwyd experience high dividends.

Several speakers with business interests throughout the city testified before the committee over four hours yesterday, many in support of the legislation.

"We support modernizing city government, because only when we work together to adjust the capacity of City Hall to fit our city's needs for the 21st century will we create the flexibility to reduce the wage and business taxes that are stifling Philadelphia's economic competitiveness every day," said Mary Faustino, representing the Asian American Chamber of Commerce of Greater Philadelphia.

City Finance Director Rob Dubow testified that the mayor takes no stand on the issue until the matter is studied further.

If passed, Green's bill would eliminate the net-income portion of the city's BIRT in five years. Green and his co-sponsors now await an analysis of the new, would-be rates from the Nutter administration.

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