Philadelphia Growth Coalition Releases Labor Day Study
Showing Change in City Taxes Would Create Nearly 80,000 jobs
Proposal to lower wage and business taxes in Philadelphia awaits introduction in PA Legislature
(Philadelphia) – An analysis by Econsult Solutions Inc. (ESI) projects that the Philadelphia Growth Coalition’s proposal for wage and business tax reductions – paid for by an increase in the commercial real estate tax rate – would lead to 79,000 jobs created in the city over the next decade. That compares to an increase of just 18,000 jobs over that same period if the changes are not enacted.
In addition to employment, ESI analyzed the plan’s impacts on tax revenues and economic growth compared to the City’s current approved Five-year plan.
ESI finds that:
- The Growth Coalition’s proposal produces more tax revenues over the first five years than the City’s most recent Five-Year Plan (it is “revenue positive”), because it pays for wage and business tax reductions with an increase in the commercial real estate tax rate.
- It remains revenue-positive over ten-years, while offering sustained and predictable tax reduction.
- It will generate significant incremental revenues for the School District.
“Adding 79,000 new jobs would have significant implications for the City’s economy and the quality of life of its citizens,” said Paul Levy, executive director of the Central Philadelphia Development Corporation and a coalition leader. “An employment growth rate, more than four times higher than the current rate, will lift more families out of poverty, which not only benefits those families, but also reduces the need for expenditures on social services, police and criminal justice associated with poverty and unemployment.”
Since 1970, Philadelphia has lost more than a quarter of its jobs. The most severe job loss has ended, but while Philadelphia has added jobs since the Recession, total wage and salary employment in the City was virtually identical in 2013 (695,000) to what it was in 2003 (698,000), and it was still lower than in 1990.
“Absent some significant change in course, Philadelphia is likely to experience static employment in the coming decade in which gains in economic up-cycles are erased by subsequent recessions,” said Richard Voith, president and principal at ESI.
Philadelphia’s unemployment rate stood at 7.1% as of March 2015, well above the national rate of 5.5%, and its poverty rate of 26.9% is among the highest nationally among large cities.
The ESI report also finds that while all cities and regions are subject to broader national economic cycles, local tax policy can have a significant impact on local trends. This occurs for two reasons: in regions like Philadelphia with multiple municipalities with multiple tax rates, residents and businesses can choose to be in different places within the metro area (avoiding tax policies of one municipality) and still access the jobs and amenities of the region.
Second, as the local economy has shifted from one of immobile and fixed assets like factories and railroads to a service economy based on highly mobile firms with skilled and educated talent, the type of taxes that a city chooses to implement can more easily discourage certain activities, just as lowering some taxes can make it easier for activities and investments to occur.
“Municipal taxation is not simply a means of raising revenue; it is an essential part of economic development, Voith continued. “To remain competitive within the region and to grow jobs for all neighborhoods, Philadelphia needs an even-handed approach to tax rates for all types of businesses and all for all parts of the city. ESI finds that the Growth Coalition’s proposal provides a far more competitive mix of taxes than the City’s current Five Year Plan.”
Philadelphia followed a mandated schedule of tax reductions from 1996 to 2008 until the Recession led to the suspension of the program. Since then, tax rates have been authorized on an annual basis with significant tax increases implemented for the last four years with no certainty provided about future years, other than the aspirations of rates that appear in the City’s Five Year Plan. The Growth Coalition advocates for a return to a mandated schedule of tax cuts.
The lynchpin to the plan is gaining a Pennsylvania constitutional amendment to allow Philadelphia to collect a higher tax rate for commercial property than for residential. Under state law, all property must be taxed at a uniform rate. Philadelphia City Council approved a resolution calling on the state legislature to seek the amendment. The proposal is expected to be introduced in the general assembly this fall.
The Growth Coalition comprises a wide range of business and labor organizations and individuals.
For more information about the Philadelphia Growth Coalition and to read the ESI report, visit http://philadelphiagrowthcoalition.com/.
September 7, 2015
Contacts: Kirk Dorn or Curtis Blessing