From The Morning Call




By TINA MOORE
Of The Associated Press

November 27, 2001

PHILADELPHIA -- High business and wage taxes have forced venture capitalist Paul Tirjan to advise companies to leave the city for Philadelphia’s suburbs.

We have a responsibility to our investors to make sure they have the best chance for success. So we would have to encourage them to locate in a tax-friendly environment, said Tirjan, director of Burrill & Co., which works primarily with biotechnology companies.

He was among business leaders at a meeting Monday where City Controller Jonathan A. Saidel proposed an aggressive overhaul of Philadelphia’s tax structure. Saidel’s plan calls for lowering the wage and some business taxes and instituting a land-value tax.

Saidel’s 93-page report predicts the city will continue losing businesses and residents to the suburbs and other urban areas unless taxes are reformed.

There are people who will say we can’t afford to do this, Saidel said. But the reality is if we do nothing, we will continue to lose population.

Rob Debow, the city’s budget director, said the city is making gradual changes that would lower the wage tax, which raises half the city’s revenue.

Philadelphia plans to decrease the wage tax to 4.39 percent for city residents and 3.81 percent for nonresidents over the next five years, he said. City residents now must give the city 4.54 percent of their wages; nonresidents hand over 3.95 percent.

Saidel’s plan would accelerate wage tax reductions, lowering the tax to 4 percent for city residents and increasing the city real estate tax beginning in 2003. The plan would lower the wage tax to 3.5 percent for city residents and 3.38 percent for nonresidents by 2007.

The land tax portion of the proposal would change the way city property is taxed. Currently, taxes on structures and improvements generate about 77.5 percent of the city’s real estate tax revenues, according to Saidel’s report. His plan proposes to have property and structures and improvements generate an equal amount of revenue.

We penalize residents for fixing up their houses, while the guy who’s sitting on a piece of property for 10 years doing nothing gets benefits because of reduced property value, said Councilman James Kenney, one of five council members who attended the presentation.

Together, the increased property tax and decreased wage tax would amount to just over a $100 savings for a family of four with an annual household income of $45,000 and a home with a market value of $80,000, according to the report. The report says a college graduate with an annual income of $35,000 who is renting would save about $188 annually with Saidel’s plan.

A spokeswoman for Mayor John Street said he received the report Monday and hadn’t had time to read it.

But Debow said Saidel’s proposed changes are too fast, too expensive and could negatively affect city services.

We all agree that taxes should continue to go down, but the administration’s point is that it should be done gradually, he said.

Saidel said he realizes the plan is going to be a hard sell because of the region’s worsening economy and other nagging problems in the city, including urban blight and the plight of the public school system.

It is important to begin a process to change the way we do business in Philadelphia, he said.

Copyright © 2001, The Morning Call

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