Philadelphia’s next budget will not include any wage or business tax cuts, marking a political victory for first-year City Manager Sherrell L. Parker and answering one of the more significant unresolved questions as budget negotiations reach their final stages.
Councilman Isaiah Thomas, who has been a driving force behind recent cuts to business income and sales taxes, acknowledged Thursday that he and other council members will abandon tax-cut efforts in the city’s budget, which goes into effect July 1. He said council members want to align with Parker and wait for the recommendations of a new tax reform commission, which is expected to be released in the fall.
“We want to come together with the mayor and do everything we can,” Thomas said.
The move marks a departure from recent precedent in City Hall tax policy and a setback for the business community, which has successfully lobbied for tax cuts in recent years.
” read more: How Mayor Parker is changing the debate about taxes in Philadelphia
Dating back to the 1990s, successive Philadelphia mayors have supported a policy of gradually lowering payroll taxes through small annual cuts, which are among the highest in the country: 3.75% for city residents and 3.44% for those who work in Philadelphia but live elsewhere.
However, Mayor Parker proposed no tax cuts in his $6.29 billion budget proposal, which he released in March, despite the city’s relatively strong financial position. The mayor has said he supports lowering both taxes in the long run, but believes the most immediate way to help the business community is to fulfill his campaign promise to make Philadelphia “safer, cleaner and greener.”
She also said she wants to wait until the Tax Reform Commission has produced its report and seen action at the state level before committing the city to further tax reform. Specifically, the mayor wants to amend the state constitution to allow Philadelphia to tax commercial property at a higher rate than residential property. She also wants Harrisburg to raise Pennsylvania’s minimum wage to $15 an hour from the current federal minimum of $7.25. Both of these efforts face significant political headwinds and would take years to achieve.
The tax cuts in recent years were seen as a sign that City Hall politics were moving back to the center after years of leftward momentum, and that business was gaining greater influence over lawmakers.
Thomas said Thursday that he worries not passing tax cuts this year would send the “wrong message” to businesses, but he’s confident Congress will continue to work on tax cuts in the long run.
Thursday’s City Council meeting was the last opportunity for council members to introduce and pass legislation before they go on summer recess on June 13. But neither Thomas nor Councilwoman Katherine Gilmore Richardson, who is the council’s representative for wage tax cuts, introduced any legislation.
Neither the City Council nor the mayor proposed any changes to the property tax rate (1.3998% of the assessed value) this year. But the city plans to resume property reassessments next year after a one-year hiatus in Mayor Jim Kenney’s final year in office, and the new assessments will mean higher property taxes for thousands of Philadelphia property owners.
That’s why lawmakers are considering tax relief measures that would take effect next year, including an increase in the home exemption for owner-occupied homes.
With tax policy debate all but concluded, Congress and the administration have a week to reach a final agreement on spending allocations for the next budget.
A group of progressive City Council members on Thursday morning called for $14 million to build new affordable housing on the UC Townhomes site, $5 million for the Philadelphia Energy Department’s Built-to-Last program, which helps low-income homeowners make energy-efficient home repairs, $50 million for rental assistance and $2.6 million for the Department of Worker Protection.
“This coalition is fighting for a budget that works for working families,” City Councilman Jamie Gautier said at a press conference before Thursday’s meeting.
This is a developing story and will be updated.
