City Council Continues To Look at Business Tax Proposal

Following two days of polarizing debate, Philadelphia City Council decided it needed more time on a proposal to alter the business privilege tax.

Sponsored by Councilman Bill Green and Councilwoman Maria Quinones-Sanchez, the bill seeks to lower the tax on net income and increase the tax on gross receipts for city merchants. They reason that Philly-based businesses are taxed on income and say others are taxed only on receipts, and say the bill will encourage industry to stay in the city.

However, the measure has snagged as Mayor Michael Nutter and City Controller Alan Butkovitz favor exactly the opposite.

City Council heard both sides Wednesday in the Committee on the Whole.

Representing the administration's perspective, City Finance Director Rob Dubow said hospitality, construction and other blue-collar industries would be the biggest losers. The biggest winners, he said, would be law firms, financial groups and other white collar groups.

"One of the major economic drivers of the city would see a $5 million increase in its tax bill ... presumably, a tax increase would inhibit growth within the hospitality industry," he said.

Dubow favored a gradual reduction on both proportions of the tax, as the Department of Revenue estimates a $23.2 million loss to the general fund if the bill passes.

Speaking in the bill's favor, Stephen Mullin of Econsult highlighted the tax exemption on the first $100,000 on revenue, which should help small businesses. 

"I think this proposal is the best possible thing (given restraints) to increase demand in the region," he said.

Councilman W. Wilson Goode, Jr. combated that point by saying the tax increases would negatively affect the "demand," as the hospitality industry could take its business elsewhere. 

Eighth District Councilwoman Donna Reed Miller's Director of Legislation William Nesheiwat said Thursday that Miller needs to hear more from business owners before staking out a definitive opinion on the matter.

"She's really not comfortable making a decision on something that large and that impactful until, I believe, she has spoken to more members of the business community," Nesheiwat said.

At least one local business owner said he isn't happy with the legislation as it stands.

Ken Weinstein, owner of the Trolley Car Diner in Mount Airy, said if the legislation is passed, his taxes will increase significantly next year and beyond. According to his calculations, the diner's business privilege tax would go up by about 70 percent between now and 2015 if the reform passes.

Weinstein said he supports the idea of moving the tax burden to businesses outside the city is, basically, a good one. But he said he feels it is currently being done the wrong way.

"What it favors is the high margin businesses—those people that charge professional fees like law firms," Weinstein said. "And the small businesses it's going to hurt are your low-margin retail businesses like the diner. Those are the unintended consequences."

After two days of lengthy hearings, City Council tabled the matter and will take it up again Dec. 15.

Mount Airy Patch Editor Zach Subar contributed to this report.