The Philadelphia Tax Reform Commission (Tax Reform Commission) recently released comprehensive recommendations to reduce poverty and create economic opportunities for Philadelphians. Philadelphia’s economy is underperforming, and it’s hurting our communities.
Philadelphia has the highest poverty rate among the 10 largest cities in the nation. Philadelphia residents are more likely to be poorer than their parents. Small business owners in the city are dissatisfied and looking to leave. Philadelphia residents and businesses face tax burdens worse than any other city in the country and our neighboring counties.
If Philadelphia wants to get our city out of poverty and create opportunities, we need tax reform that creates jobs, encourages businesses to grow, and breaks the cycle of poverty that has locked in too many Philadelphians.
“Philadelphia’s economy is underperforming, and it’s driving many of our residents into poverty,” said Philadelphia City Council President Kenyatta Johnson (Second District). “We have the highest poverty rate among the nation’s ten largest cities, with many of our residents in deep poverty. Philadelphia’s tax structure is unlike any other system in the country. If we want to lift our residents out of poverty and create economic opportunities, we must change how we tax our people and businesses while still providing critical services.”
“I want to thank the 15 members of the Tax Reform Commission for their willingness to tackle this important issue,” Johnson continued. “We need a tax structure that encourages businesses to move into Philadelphia and, most importantly, stay in Philadelphia. It is important to create an environment that is tax friendly as means to promote job growth and tackle poverty. I know we can find a healthy and fair balance between providing tax relief for businesses, while also significantly investing in small businesses, which are the bedrock of our economy and our neighborhoods.”
Philadelphia’s Economy is Underperforming, Leaving Many Residents in Poverty and Blocking Economic Opportunity
Highest Poverty Rate: At 20.3%, Philadelphia has the highest poverty rate among the ten largest U.S. cities, with one in ten residents living in deep poverty.
Declining Economic Mobility: Philadelphia ranks50th among the nation’s 50 largest metropolitan areas for economic mobility, with today’s low-income children earning less than their parents.
Business Exodus: A 2024 Diverse Chamber Coalition survey revealed extreme dissatisfaction among business owners, with a net promoter score of -29. Many cite the city’s complex tax system as the number one barrier to growth.
Fewer Businesses: Philadelphia has fewer small businesses than our peers, which means fewer jobs and less economic opportunity in our neighborhoods. Philadelphia has the lowest number of businesses among 15peer cities – 127 private businesses for every 1,000 working-age residents.
Tax Reform Will Help Small Businesses, Reduce Poverty, and Create Economic Opportunity
The Tax Reform Commission’s recommendations will reduce poverty and create economic opportunities for Philadelphia residents by fixing the city’s burdensome tax structure. The recommendations will help encourage small businesses to grow and hire in our communities, helping to lift Philadelphians out of poverty and create economic opportunity in our neighborhoods.
- 1. Eliminating the BIRT Tax Burden to Encourage Small Business Growth and More Hiring
Philadelphia’s Business Income and Receipts Tax (BIRT)includes a net income portion that exists nowhere else in the region, making it harder for businesses to grow and hire. The Commission recommends fully eliminating the BIRT tax burden over the next 8 to 12 years.
- Reducing the Wage Tax to Make it Easier For Residents to Make Ends Meet
Philadelphia residents face one of the highest wage tax rates in the country. The Commission proposes a wage tax reduction to an eventual rate at or below 3 percent.
- Creating Predictability With Set Tax Rate Reductions
A commitment to a steady, predictable tax reduction schedule will help businesses grow and hire in Philadelphia. We need to provide consistency so business can plan and expand in our neighborhoods.
- Establishing the Jumpstart Fund to Fuel Job Growth
The Tax Reform Commission recommends reinvesting 10% of BIRT tax revenue reductions into a special investment fund, the Jumpstart Fund, aimed at supercharging business and job growth. Philadelphia will also work with the private sector to match funds and create jobs.
Additionally, Philadelphia needs state policy change to manage the city effectively and expand its revenue-generating capacity. The Tax Reform Commission is recommending increased state advocacy to raise the city’s minimum wage to $15 an hour, preserve the Sterling Act, and secure state approval for market-based sourcing of services and intangibles.
The Tax Reform Commission is also recommending increasing enrollment in tax relief programs by exploring auto enrollment opportunities when possible and cross outreach/enrollment with other city government relief programs; revising the process for low-income workers to request a city wage tax refund to make it easier for eligible residents to receive the refund; expanding access to federal and state government benefits; and enabling the City of Philadelphia’s Assessment Equity Task Force to continue addressing and improving fairness in the property assessment process, particularly for communities that may be disproportionately affected by property taxes.
The Tax Reform Commission members wants to thank the members of the Tax Reform Advisory Committee for their recommendations and input into this process.
A Vision for Philadelphia’s Future
With a more fair and equitable tax structure, the Tax Reform Commission believes Philadelphia can create tens of thousands of new jobs in the city over the next five years – offering more economic opportunity to our residents and lifting thousands out of poverty.
“The historical tax structure has made it challenging for ambitious Philadelphians to create businesses and hire from their communities,” said Matt Stitt, Co-Chair of the Tax Reform Commission. “We have residents stuck in cycles of poverty while many others have to commute out of the city to job centers. We want the city to be an easier place for small businesses to grow and thrive in our communities, and the best way to start is to create a tax structure that no longer overburdens Philadelphia business owners.”
“The Tax Reform Commission’s recommendations are about creating opportunities for every Philadelphian,” said Richard Vague, Co-Chair of the Tax Reform Commission. “We need a tax system that works for our residents, businesses, and future. The Tax Reform Commission’s recommendations are a roadmap for a stronger, more competitive Philadelphia with reduced poverty and more economic opportunity for Philadelphians. We cannot keep doing the same thing as our residents fall behind. We must let our small businesses create jobs in our communities, hire more Philadelphians, and create economic opportunities for our neighbors.”
In February 2024, City Council overwhelming approved Resolution #240108, sponsored by Council President Johnson, to reconvene the Philadelphia Tax Reform Commission. The Commission conducted an updated comprehensive analysis of all taxes imposed in Philadelphia, including by the Commonwealth of Pennsylvania, and to make recommendations concerning tax reforms.
Four members each were appointed by Philadelphia Mayor Cherelle L. Parker and the Council President, one member appointed by City Controller Christy Brady, and the remaining members (one each) were selected by various local Chambers of Commerce in Philadelphia.
The 15 members of the Commission are as follows:
- Paul Levy, Richard Vague (Co-Chair), Jovan Goldstein, and Ryan Boyer (Council appointments)
- Matt Stitt (Co-Chair), Folasade (Sade) Olanipekun-Lewis, Jerry Sweeney, and Greg Segall (Mayor appointments)
- Allan Domb (City Controller appointment)
- Jennifer Karpchuk for The Chamber of Commerce for Greater Philadelphia
- Derek Green for the African American Chamber of Commerce of Pennsylvania, New Jersey, and Delaware
- Victor Garrido for the Greater Philadelphia Hispanic Chamber of Commerce
- Daniel McElhatton for the Greater Northeast Philadelphia Chamber of Commerce
- Zachary Wilcha, Chief Executive Officer, for the Independence Business Alliance, the Greater Philadelphia’s LGBTQ+ Chamber of Commerce
- Dr. Khine Arthur, President/CEO, for the Asian American Chamber of Commerce of Greater Philadelphia.
For more information on the Tax Reform Commission’s recommendations, visit: https://phlcouncil.com/taxreform/
