As rising costs strain our community and household budgets, Philadelphia Mayor Cherelle Parker’s proposed taxes attempted to patch gaping holes with meager solutions. Philadelphia urgently needs revenues to fill gaps left by federal cuts to healthcare and food assistance programs. But the most prominent idea — an increase in taxes on rideshares — will not raise close to the amount needed.
Philadelphia should identify new revenues to ensure ongoing fiscal stability and make sure that the wealthiest residents and companies pay their fair share. Cities across the country, including Chicago, New York and Seattle, are reshaping how local governments think about taxing the wealthy through new innovative taxes. Philadelphia should follow their lead.
A recent report by POWER Interfaith lays out the scale of what’s coming: Philadelphia received more than $2 billion in federal grants last year — roughly one-third of its entire city budget — and that foundation is crumbling. In a city where 30 percent of residents count on programs like SNAP and Medicaid, every one of these cuts lands hardest on working-class people. This moment demands a fundamentally different approach to funding vital public services.
One way Philadelphia could prevent a budget shortfall is by repealing business tax cuts enacted by the City Council last year.
Those skeptical that Philadelphia can meaningfully address its affordability crisis have called it a problem without “many good options” — a conclusion that settles for old solutions rather than ask the city’s wealthiest to contribute for the public good.
One way Philadelphia could prevent a budget shortfall is by repealing business tax cuts enacted by City Council last year. While minimal this year, cuts to the BIRT (Business Income & Receipts Tax) are estimated to cost the city $2 to $3 billion over the next 10 years, and will erode an essential funding stream.
The decision to reduce the tax paid overwhelmingly by big businesses — thanks to a longstanding exemption for small businesses that has since been revoked — should have been a nonstarter. Budgets cannot sustainably be balanced on the backs of people already struggling with rent, property taxes, food prices, and healthcare insecurity. As the cost of living skyrockets and cuts to safety net programs take hold, that type of tax policy is even more risky. There are better solutions.
A new report from the Institute on Taxation and Economic Policy and the Local Progress Impact Lab illustrates how localities across the country use progressive taxes to fund public services we all rely on. Here are just a few examples of taxes that could be adopted by Philadelphia.
Our personal data is a profitable — yet invisible — commodity of the modern economy. As Big Tech companies flood our screens with ads and invade our communities with data centers, legislators in New York, Minnesota, and Chicago are exploring data mining and social media taxes in a growing effort to make digital corporations contribute more to the communities they profit from. In Harrisburg, a digital ad tax is gaining momentum and projected to bring in half a billion dollars annually.
Local leaders should take the concerns of all working families into consideration and focus our tax structures to support the people least able to pay, as other cities have done.
With roughly 60 percent of Americans saying the wealthy “don’t pay their fair share,” wealth taxes are increasingly popular across the country. These take various forms, but one option is a tax on proceeds generated from wealth: a charge on the ownership of non-material assets like stocks, bonds, and mutual funds, or wealth generated from them. A modest tax of 0.4 percent could raise more than $200 million annually for Philadelphia. Lehigh County commissioners are considering a similar initiative that could generate more than $25.5 million annually. The proposal shields working families by excluding primary homes, retirement accounts, and owner-operated small businesses. While some will argue that wealthy residents could relocate to avoid such a tax, research shows that tax-induced migration among high-income households is generally limited.
Cities with rapid gentrification frequently struggle to make property taxes and real estate transfers equitable for lower-income, longtime residents while still capturing the value of high-dollar real estate sales fairly. Philadelphia already increased the Realty Transfer Tax (RTT) to 3.578 percent last July. An additional increase of just 0.3 percent could generate another $25 to $30 million annually from the luxury developments reshaping the city, helping to ensure that those profiting from booming development help fund investments that enable longtime residents to stay in the communities they’ve built. Pittsburgh’s City Council raised the RTT to 5 percent, generating $10 million for affordable housing.
These ideas are part of a broader reckoning with the cost of living nationwide. Affordability has become a rallying call across the country as the rich get richer and basic needs like childcare, housing, and food get more expensive. Local leaders should take the concerns of all working families into consideration and focus our tax structures to support the people least able to pay, as other cities have done.
The question facing City Council and the Mayor is who this year’s budget will rely on most. Building a budget that does not rest on the shoulders of its poorest residents is not only a moral imperative, it’s smart, responsible, and sustainable tax policy, and a tested model Philly should steal.
Rita Jefferson is a Local Analyst for the Institute on Taxation and Economic Policy, a left-leaning think tank, who works on local tax issues nationwide.
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