Council President Kenyatta Johnson’s Tax Reform Commission released its interim report last Tuesday and promised “bold action” — whatever that means…
By Denise Clay-Murray
“Let me tell you how it will be…
It’s one for you 19 for me…
‘Cause I’m the taxman…
Yeah…I’m the taxman…”
I always think of this song from The Beatles’ “Revolver” album when we talk about taxes in City Hall.
Because I’m a native of New Jersey — and Jersey has some of the most ridiculous property taxes I’ve ever seen outside of California or New York City — I often tell Pennsylvanians in general, and Philadelphians in particular, that they have it better than most.
But since Philadelphia is the poorest city of its size in America and a lot of that is connected to economic opportunities, or the lack thereof, City Council occasionally takes a look at ways to change that dynamic. And the way they ultimately choose almost always begins with a look at the city’s tax structure.
When Councilmember Kenyatta Johnson became Council president, he decided that it was time for the city to take that task on once again.
“I introduced legislation to create the Tax Reform Commission to look at ways to make our city not only more competitive but address the issue of poverty by focusing on job growth and development,” Johnson said. “If we want to raise the mark of being the largest poor city in America, we must focus on jobs. We must focus on economic development. So, I look at this as a way to invest in not only small businesses, but businesses in general, because if we don’t provide opportunities for people to have good jobs, good paying jobs, then you can’t purchase a home. If you don’t have a good job, you can’t purchase groceries for your family.”
Last Tuesday, Council’s Tax Reform Commission released an interim report which included a bunch of suggestions on ways to make the city’s taxation system a little more friendly for businesses that want to start or stay in the city. The commission, which is co-chaired by Richard Vague, author of the book “The Paradox of Debt: A New Path To Prosperity Without Crisis” and Matt Stitt, a managing director for PFM Group Consulting LLC, is made up of appointees from Mayor Cherelle Parker’s office, Council President Johnson’s office, Controller Christy Brady’s office, the Greater Philadelphia Chamber of Commerce, members of the African American, Hispanic, Asian chambers and the Independence Business Alliance.
According to the report, Philadelphia has the fourth lowest number of private businesses among the 15 largest metropolitan regions. Part of the reason for that is the city’s taxation policies, Vague said. These policies have led to the population outside of Center City stagnating, and to small businesses picking up and moving into the suburbs once they’ve been established, he said.
“Small business owners crushed by taxes that don’t exist anywhere else in the country, are dissatisfied and leaving now,” Vague said. “In 2024, the Diverse Chamber Coalition survey conducted by our superstar small chambers found that Philadelphia businesses owners are dissatisfied.”
So, to make those businesses satisfied enough to stay, the commission has a few recommendations according to the report:
1: Eliminate the tax burden by getting rid of the Business Income and Receipts — or BIRT — tax. This tax, a combination of the net income tax and the gross receipts tax, applies to the profit-making activities of any business. The Commission suggests getting rid of the net income portion altogether before getting rid of the gross receipts portion.
2: Reducing the wage tax to 3% or less. This one actually isn’t new. Council has been reducing the wage tax slowly for a while now.
3: Partner with the state to raise the minimum wage to $15. Again, this isn’t a new idea. In fact, Council has passed legislation raising the minimum wage to $15. And the Commonwealth has shut the legislation down the same way it does any legislation Philadelphia passes that might help city residents; by saying that only the state is allowed to make those decisions. And if you’re waiting for the State Legislature to raise the minimum wage to $15, good luck with that.
4: Putting together a fund that would serve as a seed investment to small businesses. There was another suggestion that I really took notice of, and that suggestion is to create a 20-year tax abatement for troubled buildings. Now, I understand that office buildings in Philly are kind of in bad shape right now and are having trouble getting folks to move in and pay them rent. But unless this is going toward creating affordable housing by converting these buildings, that’s a no for me (and most of the city), dawg.
Now where this gets interesting is that the Commission has an advisory board. This 23-member group is made up mostly of academics and community members, and to say that their priorities are different is an understatement.
For example, while the advisory board has no problem with making the BIRT more friendly to small businesses, it doesn’t want an across-the-board cut. They also would like to see a “wealth tax” imposed to offset the impact of any tax cuts. Their report — which was released prior to the tax commission’s — even calls for reparations for the descendants of American Freedmen.
(I can think of one City Council public commenter that would LOVE to see that implemented.)
As the city considers Mayor Parker’s 2025-2026 budget over the next few months, it’ll be interesting to see how much, if any, of these things get implemented. In any case, the Tax Commission will continue to work on the city’s tax policy, and we’ll all see what comes out of this.
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