Taylor’s bill allows tax increases on commercial properties, offset by equal reductions in business and wage taxes
6/28/2016 – State Rep. John J. Taylor, a Philadelphia Republican, introduced HB 1871 June 22, which proposes to amend the Pennsylvania Constitution’s Uniformity Clause as it pertains to the Philadelphia Real Estate Tax.
The bill as recommended by several business, labor and civic groups, would allow for higher taxes on commercial real estate in Philadelphia. Any increase in such taxes would require equal reductions in business and/or wage taxes. His co-sponsorship memo of March 3, 2016 is reprinted here:
In the near future, I plan to introduce legislation that will amend the Pennsylvania Constitution to allow Philadelphia to address the issue of stagnant job growth.
Since 1970, Philadelphia has lost more than a quarter of its jobs. Lately, severe job loss has ended but job growth, wage growth, and salary employment in the city has been identical to what it was in 2003 and still lower than in 1990. Philadelphia’s unemployment rate stood at 7.1 percent as of March 2015 which is well above the national rate of 5.5 percent. Almost 40 percent of the working residents of the Philadelphia neighborhoods need to reverse their commute to the suburbs to find work.
To address this situation, a broad coalition of business, labor, and civic groups, along with the Tax Commissions of both 2003 and 2009, have concluded that in order to grow the number of jobs in Philadelphia, we must reduce wage and business taxes and shift to greater reliance on the real estate tax for businesses.
The consensus is that wage and business taxes must be reduced to make Philadelphia more competitive at attracting jobs. To replace that revenue, the coalition has concluded that a shift to a slightly higher real estate tax on businesses is necessary.
Currently, the Uniformity Clause (Article VIII of the Pennsylvania Constitution) requires that all taxes in the Commonwealth be applied uniformly among the same class of subjects. This legislation will permit Philadelphia to impose taxes on real estate used for business purposes at a tax rate that exceeds the tax rate applicable to other real estate.
That rate cannot vary by more than 15 percent from the rate applicable to other real estate. Most importantly, Philadelphia must then reduce the aggregate revenues of other business taxes (wage and business taxes) by the amount of any real estate tax revenues attributable to the rate variance.
This proposal is limited to Philadelphia because the city is unique for its extraordinary reliance on wage and business taxes that provide 66 percent of municipal tax revenues. Business taxes are 20 percent -30 percent higher than the regional average, while real estate taxes are two-thirds of the regional average.
This legislation will give the city the opportunity to realign its tax revenues to stimulate job growth for the region.