City of Philadelphia's unattractive business climate? (York: sales, real estate, condo)

[Libohove90]

My uncle owns a printing warehouse that is growing pretty rapidly and he wants to find a new warehouse in the suburbs or in Jersey, because Philadelphia apparently taxes 6% on business profits. Is this true or am I miscomprehending?

I have always known through experience that many businesses in the Philadelphia area prefer to locate in the suburbs because the city apparently has a tax code that deters businesses. Can someone explain to me what exactly does Philadelphia do that causes this?

How is the business climate in Philadelphia different from New York City and Chicago (places that seem to attract businesses)? What do NYC and Chicago do that attract businesses to their city and why doesn't Philadelphia follow the policies of those two cities since they are world-class business centers?

Thanks

[FindingZen]

Well...NYC is NYC. Chicago is the "capital of the Midwest". So both cities have their inherent advantages.

One thing that hurts Philly IMO is that the tax structure is uneven. Collecting corporate property taxes has been historically difficult. The wage tax, while slowly shrinking, has surely been a factor in companies (re)locating in the 'burbs where land is/was practically given away. Philly's plan of targeted tax breaks as well as its participation in state-instituted Enterprise Zones has had mixed results.

Repurposing the Naval Yard as a corporate office park was a good idea. It would be nice if it were able to bring in more business from the 'burbs (or outside of the region) instead of simply churning existing Center City business.

[Libohove90]

Originally Posted by Tone509

Well...NYC is NYC. Chicago is the "capital of the Midwest". So both cities have their inherent advantages.

One thing that hurts Philly IMO is that the tax structure is uneven. Collecting corporate property taxes has been historically difficult. The wage tax, while slowly shrinking, has surely been a factor in companies (re)locating in the 'burbs where land is/was practically given away. Philly's plan of targeted tax breaks as well as its participation in state-instituted Enterprise Zones has had mixed results.

Repurposing the Naval Yard as a corporate office park was a good idea. It would be nice if it were able to bring in more business from the 'burbs (or outside of the region) instead of simply churning existing Center City business.

Why can't the City of Philadelphia end this dumb wage tax if they know it will deter businesses away? I know they need revenues, but a wage tax sounds like it does more harm than good. Do NYC and Chicago have wage taxes?

[FindingZen]

Originally Posted by Libohove90

Why can't the City of Philadelphia end this dumb wage tax if they know it will deter businesses away?

Because the city has services that need to paid for. There could be some argument for speeding up the phase-out of the wage tax...but that could put what is already a precarious position for the city into a freefall.

I know they need revenues, but a wage tax sounds like it does more harm than good. Do NYC and Chicago have wage taxes?

I believe each of them do. Granted, because they are indeed NYC and Chicago, there will no shortage of people and business that choose to go there despite the wage tax. Philly's relative advantage is that it is the largest - if not necessarily most booming - business market in the state.

[tom_567]

Chicago does not have a local wage tax, NYC does and it's about 8% for residents.

Taxation in general is a nightmare in Philadelphia. The business taxes are just one part of it.

For example, the Philadelphia Business Privilege Tax (BPT) has a 6% net profits tax AND a 1.4% gross receipts tax (you get taxed on what you take in and also on what you actually make after expenses).

BPT also applies to self-employed people (in lieu of the 4% wage tax). And with the 4% wage tax, workers don't demand less money, they'll pass that off to their employer before accepting a job, so it costs more to hire talent. Plus, city council is floating a mandatory paid sick-day proposal for city employers in a shaky economy.

There are also a lot of things about the mechanics of paying taxes in the city that are onerous. The city wants pre-payment for the BPT, regardless of whether the business actually turns a profit, etc.

Add in the horror stories from the license and inspections department (they perform a bogus inspection to shake people down for money), unions (try opening a shop without hiring union workers to do electrical work, etc.), and you have a place that is expensive in money and time to do business.

Most nearby places (even New Jersey!) are moving to a single-factor sales taxes on businesses and can provide rents for cheaper than Center City, without as many headaches as Philadelphia proper.

The property tax assessment situation in Philadelphia is also ridiculously unfair. As much as people complain about NJ property taxes (including me, since I live in NJ), they are at least mostly equitable and routinely assessed. In Philadelphia, you can buy a house for $220,000, pay $1800 in property tax, while your neighbor next door pays $700 (for the same house last assessed in 1987), and the new condo across the street has a 10-year abatement! The same inequities exist in commercial real estate.

Overall, I love the city -- I think the city has a lot to offer and could be so much more than it is.

But, the city needs to learn that you spend revenues, not rates. And to get there will take tough cuts to services and fairness in assessments/collections, both of which will cost money and votes. Not a popular referendum by any means, but necessary if people want to find work in Philadelphia instead of the surrounding burbs.

[FindingZen]

Originally Posted by tom_567

Chicago does not have a local wage tax.

I stand corrected. And thanks for the rest of your detailed information as well.

[Libohove90]

Originally Posted by tom_567

Chicago does not have a local wage tax, NYC does and it's about 8% for residents.

Taxation in general is a nightmare in Philadelphia. The business taxes are just one part of it.

For example, the Philadelphia Business Privilege Tax (BPT) has a 6% net profits tax AND a 1.4% gross receipts tax (you get taxed on what you take in and also on what you actually make after expenses).

BPT also applies to self-employed people (in lieu of the 4% wage tax). And with the 4% wage tax, workers don't demand less money, they'll pass that off to their employer before accepting a job, so it costs more to hire talent. Plus, city council is floating a mandatory paid sick-day proposal for city employers in a shaky economy.

There are also a lot of things about the mechanics of paying taxes in the city that are onerous. The city wants pre-payment for the BPT, regardless of whether the business actually turns a profit, etc.

Add in the horror stories from the license and inspections department (they perform a bogus inspection to shake people down for money), unions (try opening a shop without hiring union workers to do electrical work, etc.), and you have a place that is expensive in money and time to do business.

Most nearby places (even New Jersey!) are moving to a single-factor sales taxes on businesses and can provide rents for cheaper than Center City, without as many headaches as Philadelphia proper.

The property tax assessment situation in Philadelphia is also ridiculously unfair. As much as people complain about NJ property taxes (including me, since I live in NJ), they are at least mostly equitable and routinely assessed. In Philadelphia, you can buy a house for $220,000, pay $1800 in property tax, while your neighbor next door pays $700 (for the same house last assessed in 1987), and the new condo across the street has a 10-year abatement! The same inequities exist in commercial real estate.

Overall, I love the city -- I think the city has a lot to offer and could be so much more than it is.

But, the city needs to learn that you spend revenues, not rates. And to get there will take tough cuts to services and fairness in assessments/collections, both of which will cost money and votes. Not a popular referendum by any means, but necessary if people want to find work in Philadelphia instead of the surrounding burbs.

Do you think it's reasonably possible for future city leaders to completely change the nightmare tax structure that Philadelphia has? This would certainly be huge for the city.

[FindingZen]

Originally Posted by Libohove90

Do you think it's reasonably possible for future city leaders to completely change the nightmare tax structure that Philadelphia has? This would certainly be huge for the city.

As you can imagine, a fair amount of people have a stake in the status quo. While one-party rule can lead to complacency and abuse no matter which party is in charge, I think City Council might benefit from more GOP representation which would ostensibily support streamlining and equalizing the tax burden.

[pman]

the city taxes .14% of gross receipts and 6.45% of net business income. no city in the country taxes both gross and net income outside philadelphia and the only city with a tax regime remotely as oppressive as philadelphia's is ny, and, well, it's ny. well, not exactly true, the only city with a large business profit tax that isn't philadelphia or ny is detroit. that means taxes on business are actually lower in places like san francisco, boston, chicago, and DC. hard to believe but it's true. it's also the only city I know that doesn't just tax its residents but people who commute into it.

[Angus215]

Add to that the state of PA's oppressive 9.99% corporate income tax and it's a wonder anyone does business here at all.