Compared to burbs, city tax burden has eased
March 16, 2009
Dave Davies , Philadelphia Daily News
As Mayor Nutter and City Council cope with the city's troubled finances, they might take note of a change that's quietly occurred in the region's tax picture: City taxes are less burdensome when compared to the suburbs than they used to be.
In the early '90s, living in the city meant paying a wage tax of nearly 5 percent, while living and working in, say Abington, left you with no local wage tax.
But over the last 15 years, the city has steadily lowered its wage tax while dozens of outlying townships have imposed their own income tax and many have raised property taxes.
Now, Philadelphians pay a 3.83 perent wage tax - 20 percent lower than it used to be - and Abington residents pay a 1 percent earned-income tax.
"The gap between city and the suburbs has been narrowing," said Steve Wray, executive director of the Economy League of Greater Philadelphia, noting that many suburban communities have added fees for services like trash collection in addition to taxes.
Still, analysts agree that the city's overall tax burden remains higher than that of suburban communities.
The progress in reducing the wage tax gap presents a policy dilemma for Nutter and Council: Does it give them room to take a breather on wage tax cuts or even raise them for a time? Or should the city leaders be even more determined to preserve hard-fought gains in lowering the region's most hated tax?
City finance director Rob Dubow isn't popping corks over the city's progress.
"We're still high compared to other cities across the country, and higher than other places in the region," Dubow said. "We have to be very careful with what we do with our wage taxes because we don't want to make that gap even wider."
Nutter was focused on cutting wage and business taxes as a city councilman, and seems intent on confronting the current budget crisis with temporary property and sales tax hikes.
Just how much higher city taxes are than suburban taxes is hard to measure, partly because rates vary among dozens of townships and boroughs, and because both the city and suburbs have a variety of smaller taxes and fees.
The city has a one-cent higher sales tax, a 20 percent parking tax, a 10 percent liquor-by-the-drink tax, and a 5 percent amusement tax on theater, sports and museum tickets.
Some townships have special assessments for fire equipment or libraries. Some charge for trash collection, and some impose a "local services tax" of about $50 a year.
Suburban townships that are closer to Philadelphia are less likely to have their own wage tax. Lower Merion and Haverford, for example, still have none.
More urban areas in the region, like Chester, Norristown and Darby, tend to have higher taxes on income.
An analysis of 2007 wage, property and sales tax rates by Wharton finance professor Robert Inman found that the Philadelphia tax burden on a hypothetical family was roughly 13 percent higher than in Delaware County, 37 percent higher than Montgomery County, 40 percent higher than Chester County, and 44 percent higher than Bucks County.
Inman said the gaps would be narrower today because the Philadelphia wage tax has declined since he conducted that study.
Inman, a longtime and well-known critic of the wage tax, still believes it's the last tax the city should raise and the first one to lower.
"It's the one that does the damage," he said.
http://www.philly.com/dailynews/local/20090316_Compared_to_burbs__city_…