Philly has second highest tax burden in nation, study finds

    Not surprising, maybe, but it’s discouraging.

    For more than a decade now, the city of Washington, D.C., has done an annual study of the combined state and local tax burden on families living the in the largest city of each of the 50 states.

    It’s more complicated than you might think, because there are all kind of taxes — proportional wage taxes, progressive wage taxes, sales taxes, property taxes, etc. In order to compare, you have to make an assumption — say there’s a family of a certain size and income in a home of a certain value, and then see how the state and local taxes in a city hit the family.

    The Washington study is interesting in that it does several calculations for each city — for a family of five with five different annual incomes, ranging from $25,000 a year up to $150,000 a year, and one overall total.

    The good news for Philadelphia is that its tax burden isn’t the worst in the nation; that honor goes to Bridgeport, Connecticut.

    Other cities had a variety of rankings, depending on the income level of those affected. New York, for example, had the third highest tax burden for the most affluent families, but the 16th highest for the poor.

    Philadelphia rated the second highest in the country for both.

    I checked the 2001 study to see how we fared 10 yeas ago. We weren’t doing great then, but we’ve moved backward since.

    This is a bummer

    It’s a bummer because I’ve been covering this damn city for most of my working life, and for the last 20 years or so, the people who’ve run it have actually worked really hard to try and reduce the tax burden.

    No, I haven’t wandered off my meds. Hear me out.

    In the 1970s and ’80s, I watched as the city’s manufacturing base disappeared and the middle class fled to the suburbs, leaving city government in constant fiscal stress. City Hall tended to see the only options as either cutting services or raising taxes.

    So the police force shrank and rec centers and libraries deteriorated, and taxes of every kind grew.

    Then, at the end of the 1980s, the city went broke anyway.

    Ed Rendell came into office in 1992 after Council had passed a 1 percent sales tax hike to retire the accumulated deficit, and a different mentality took hold. It held that it was pointless for the city to blame Washington or Harrisburg or suburbanites, even if there was a case to make, for the city’s sad state of affairs.

    The city would have to try to compete for businesses and residents, and part of that meant restraining and, if possible, lowering taxes.

    Annual wage and business tax cuts started in 1995. The reductions were so small at first that they drew ridicule in the daily tabloid. But they came to be an expected part of the city budget, and over the next dozen years or so, those cuts along with a bonus from state casino revenues had reduced the city wage tax by 20 percent. And business taxes were lower, too.

    Then, the crash. Every local government’s budget was in the crapper. In Philadelphia, we suspended the wage tax cuts, hiked the sales tax a penny for a stretch, and enacted permanent real estate tax hikes.

    So when the latest Washington survey shows us with the second highest tax burden in the country after all that, it kind of makes you hang your head.

    City finance director Rob Dubow says the wage tax cuts will resume next fiscal year.

    Paul Levy, the executive director of the Center City District and a member of the 2009 tax reform commission, said that’s good, but the cuts need to be more aggressive.

    It won’t be easy. The school district is a financial nightmare and the city’s pension fund is in terrible distress.

    It’s hard to see a lot of sunshine in this picture, but the one hope is that the national economy will rebound. It was a huge factor in helping the Rendell team in the ’90s. If it were to come roaring back, it would matter a lot.

    You can read the Washington survey of state and local tax burdens here.

     

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