Constitutional change to fight Philadelphia job stagnation begins second march through legislature

Constitutional change to fight Philadelphia job stagnation begins second march through legislature

Author: Jason Gottesman/Wednesday, June 7, 2017/Categories: News and Views, Philadelphia

A proposed state constitutional change by Rep. John Taylor (R-Philadelphia) to give Philadelphia the tools to fight job stagnation and economic decline began its second trip through the legislature for the second-consecutive session Wednesday.


The bill, House Bill 871, is identical to House Bill 1871 that passed last legislative session.


According to Rep. Taylor, the constitutional change would alter the constitution’s uniformity clause to allow the City of Philadelphia, after enabling legislation is passed by the General Assembly, to give businesses a dollar-for-dollar reduction in the wage and business privilege tax for dollar-for-dollar increases in the real estate tax.


Rep. Taylor told members of the House Finance Committee Wednesday morning that the current wage tax and business privilege tax make starting a business and recruiting top-tier employees difficult, putting Philadelphia’s future economic growth at risk.


“We have a BIRT of 6.4 percent, in addition to that we have a tax of 0.14 or 0.16 on the gross of all businesses,” he said.


“In addition to that, the wage tax is a reason why businesses can’t locate in Philadelphia, they can’t recruit in Philadelphia; and we have this tremendous reverse commute every day, particularly to counties like Burlington and Camden [New Jersey] and as far away as Lancaster to work every day. Those suburban business locations will not be successful if the core of the city fails and this bill is really an opportunity to change that.”


Additionally, he said a shift to the real estate tax is not a business deterrent and has been sponsored by several tax study commissions and business entities in Philadelphia.


“People do not fail to locate in Philadelphia because of property taxes because, as our suburban county counterparts would say, their property taxes are vibrant as well,” he said. “On the other hand, the business privilege tax is burdensome, it’s scary to businesses, but the wage tax—to recruit young talent when almost four percent of their income goes to the wage tax if they live in Philadelphia and almost 3.5 percent if they don’t—that has been cited over and over in the last decade…as the reason for businesses not to locate in the city.”


Co-sponsor of the bill, Rep. Bill Keller (D-Philadelphia), praised the measure before the committee.


“This is a rare opportunity to give Philadelphia a tool to actually better itself,” he said. “All we are asking for is the ability.”


The legislation cleared the House Finance Committee unanimously with several Philadelphia delegation members voting in support of the legislation.


Identical legislation introduced by Sen. Anthony Williams (D-Philadelphia) has been introduced in the Senate.


While the skids for the constitutional change in the legislature appear to be greased, it was not apparent Wednesday whether, given the ability, Philadelphia will take advantage of the new tool the state could give them.


Testifying before the committee on last session’s iteration of the legislation, Philadelphia City Council President Darrell Clarke voiced his strong opposition to the specific language of the constitutional change.


"I believe that this language could tie the City’s hands in harmful and counterproductive ways," he said. "It is inflexible. It is unfair to homeowners. And if it becomes the law, I seriously doubt whether Philadelphia would ever implement the authority granted to it, given the restrictions in the current language."


He noted at that hearing the city has taken steps over the last 20 years to lower its wage and business taxes by an estimated $5.8 billion, with further cuts anticipated as part of the city’s five-year plan.


That being said, Clarke added that the city is not totally opposed to the concept of changing the tax structure as it relates to real estate, but the form of House Bill 1871 (now House Bill 871) is not the desired language.


"What Philadelphia needs is a Constitutional Amendment that provides the General Assembly with the authority to create classes of property and leave it up to City to set the tax rates that insure growth in all its business sectors and does not penalize homeowners and those who choose or must rent their homes," he said.


"What we do not need is a Constitutional Amendment that puts handcuffs on our local tax policies and one that constrains our ability to implement creative solutions that will help our City grow, prosper and contribute to the economic well-being of the Commonwealth."


A resolution was passed by Philadelphia City Council last session affirming Clarke’s position.


This position was also affirmed by testifiers including the Greater Philadelphia Chamber of Commerce and the Homeowner’s Association of Philadelphia, who either found the language in the current legislation ill-conceived or premature.

On the other hand, Philadelphia Mayor Jim Kenney sent a letter to members of the House Finance Committee prior to the vote encouraging them to approve the constitutional change.

"While House Bill 871 may not be a cure-all, it will provide Philadelphia with the tools it needs to create a positive change to the benefit of all in the Philadelphia area," he wrote. "My administration has stated that we must explore all options to reduce those taxes that inhibit job growth and discourage investment, and I believe that my administration's support for House Bill 871 is in line with that commitment."


The next step for the legislation is consideration by the full House and then the Senate. If approved, the constitutional amendment will have to be approved by the voters in statewide referendum. According to the change, the General Assembly would then have to adopt enabling legislation that would then have to be implemented through resolution by Philadelphia City Council.