Philadelphia tax burden high, but not the worst

Last week, I wrote a piece about what a bummer it was that Philadelphia had the second heaviest tax burden in a survey of 51 large cities. If you missed my post, there’s some worthwhile history of Philadelphia’s struggles with local taxes in the last 30 years.

But guess what? We’re not quite that bad.

 

I have to regard the survey itself and Philadelphia’s miserable ranking as somewhat suspect, thanks to a couple of people who pointed out that the study by the finance office of Washington, D.C. relied on official, very out-of-date and clearly inaccurate numbers on Philadelphia’s property taxes.

I’ll fill the details below if you’re interested, but I’ve done some adjusting, and it turns out Philadelphia’s tax burden his high, but not as horrific as it first seemed.

The Washington survey of the largest cites in each of the 50 states showed Philadelphia’s tax burden ranking either second or third highest in the nation, depending on the income of the family paying the taxes.

When I adjusted the survey’s findings using a more accurate estimate of Philadelphia’s tax burden, here’s what I found:

For a family making $50,000 a year, Philadelphia’s tax burden was the eighth highest in the nation, better than Newark, Los Angeles, and Chicago among others.
For a family income of $75,000, Philadelphia again ranked the eighth heaviest, with lower taxes than New York, Chicago, Baltimore, Newark and others.
For a family making $100,000, we’re number seven, besting New York, Baltimore and Newark (but we lost to Detroit).
And for a family making $150,000, we’re eighth. New York, Baltimore and Portland Maine were among those with higher burdens.
For the poorest category, families making $25,000 a year, we still came in second behind only Bridgeport, Ct. Our wage tax is a killer there.

The point here isn’t that Philadelphia’s tax burden isn’t too high, but that it has plenty of company among other aging cities we compete with. The city clearly has heavy wage and business taxes that undermine its competitiveness. What it doesn’t have is a relatively high property tax burden, and the Washington survey just missed that.

The survey dramatically overstated Philadelphia’s property tax rates because the its researchers used the official Pennsylvania state numbers, which rely on the fiction that the city’s outdated assessments are accurate. (This is a mistake I once made in a Daily News Story).

If you substitute better numbers – an effective property tax rate of 1.25 percent, you get a much more accurate reflection of the actual property taxes Philadelphians are paying, and they aren’t nearly as much as the Washington survey assumes.

I spoke with Ed Wyatt from Washington’s Office of Revenue Analysis, who made the reasonable point that he can’t start doing independent research on every city to see if their official numbers are reliable.

It underscores just how tricky it is to do a national comparison of what cities and states do, and it makes you wonder how reliable other cities’ data is. And you understand why those Pew Charitable Trusts studies of fiscal issues take so long and include such mind-numbing detail.

It’s complicated.