Philadelphia Mayor Jim Kenney (D) is proposing to increase nonresident wage taxes, parking taxes, and real estate taxes, while also freezing anticipated tax reductions.
The proposals are part of Kenney's revised $4.9 billion budget for fiscal 2021/five-year plan, which replaces the $5.2 billion budget he proposed in early March. That budget included no tax increases.
Speaking during a May 1 budget address, Kenney said, “As you all know, the ink was barely dry on [the first] spending plan when the impact of COVID-19 hit the city, the nation, and the world.”
“And now — with the impact of the virus requiring a stay-at-home order and the closing of nonessential businesses — we face an economic downturn that will equal and probably exceed the worst of the Great Recession of 2008,” Kenney continued.
The city faces a deficit of $649 million for next year, according to Kenney, who noted that the projected deficit is five times higher than the city's $108 million projected deficit during the Great Recession. Reduced revenue accounts for $535 million of the budget gap; the budget proposes $370.4 million in reduced spending through hiring freezes and pay reductions.
The budget would also generate $49.9 million by temporarily freezing planned rate reductions and increasing taxes.
The city’s business income and receipts tax (BIRT) — which is levied at 1.415 mills on gross receipts and 6.25 percent on taxable income — was scheduled to be reduced to 6.2 percent on taxable income this year, with further reductions each year until it hit 6 percent in 2023. Kenney’s budget would freeze that rate reduction at 6.2 percent and resume rate reductions in fiscal 2024. A shift to market-based sourcing for the BIRT in 2023 will continue as planned, according to the budget.
The budget would also freeze the city's wage tax at the current 3.871 percent rate until fiscal 2024; the rate was scheduled to be reduced over a five-year period. The mayor had also planned to reduce the nonresident wage tax, but the revised five-year plan would increase the rate from 3.448 percent to 3.502 percent through 2023. Rate reductions would resume in fiscal 2024.
Under the revised budget, the city’s parking tax would increase from 22.5 percent to 27 percent; the trash collection fee would increase by $200 per year; and the Department of Licenses and Inspections would be granted the authority to adjust license and permit costs to the consumer price index. A 1 percent discount for early real estate tax payments would be eliminated.
The school district portion of the real estate tax would also be increased, from 0.768 percent to 0.823 percent for a new combined rate of 1.455 percent when included with the city’s portion. This would amount to a $58 increase for a home with an assessed value of $150,000, according to Kenney's office.