A commission convened by City Council to reform Philadelphia’s tax code is recommending eliminating a levy on businesses and significantly reducing the wage tax for residents and those who work in the city.
The changes will make Philadelphia more economically competitive with its suburban counties and nearby major cities, members of the Tax Reform Commission said, as they released a 28-page report during a Tuesday news conference at City Hall.
Small business owners feel enticed to leave city limits once their revenue reaches a certain point, due to the Business Income and Receipts Tax, or BIRT, and wage taxes, according to the report.
“That’s Philadelphia’s core issue in a nutshell,” said Richard Vague, the commission’s co-chair and Pennsylvania’s former secretary of banking and securities. “Philadelphia is the poorest big city in America because we don’t have enough good jobs. We don’t have enough good jobs because our tax system drives them away.”
BIRT should be reduced and abolished over the next eight to 12 years, the commission advised. Lawmakers and the mayor should also work to bring the wage tax to 3% or less. The current rate is 3.75% for Philadelphians and 3.44% for workers who commute into the city.
Though the wage tax is the municipal government’s largest source of revenue, commission members and business leaders said Tuesday that they believe the cuts could be achieved through economic growth, not reductions to the city’s budget.
Fifteen people, mostly leaders in the business community, sit on the commission, which was first organized more than two decades ago and reformed through a Council resolution in February 2024. Members were selected by Mayor Cherelle Parker, City Council President Kenyatta Johnson, City Controller Christy Brady and local chambers of commerce.
Progressive organizers and representatives from an advisory committee that has criticized the commission decried the recommended tax overhaul.
“The Philadelphia Chamber of Commerce and some of the Democrats pushing this plan are putting forward the same development policy as Donald Trump and Elon Musk – give more money to big corporations while saying it’ll somehow trickle down to the rest of us,” said Seth Anderson-Oberman, executive director of Reclaim Philadelphia, in a statement.
“We won’t let City Hall take us back to austerity budgets,” added Erme Maula, a representative from the Tax Advisory Reform Commission.
Johnson, who spoke at Tuesday’s announcement, said the proposals were not aimed at giving breaks to large corporations and millionaires.
“We’re addressing the issue of poverty,” he added. “We’re addressing the issue of job growth and development.”
In addition to the tax rate cuts, the plan advocates for a change in state law allowing Philadelphia to set a $15 minimum wage and the creation of a fund to pay for workforce development and small business initiatives.
“We saw trickle down before and it doesn’t always work if we’re not intentional about who it should work for,” said Ryan Boyer, a commission member and leader of the Philadelphia Building Trades Council, a group of influential construction labor unions.
Johnson said the next step is to work in partnership with Parker, who is finalizing her budget proposal. Her finance director, Rob Dubow, told Metro in a statement that the administration is reviewing the commission’s work and that Parker “will have more to say about tax reform in her budget address to City Council on March 13.”
Parker’s first budget, introduced last year, did not include any changes to BIRT or wage tax rates, a break from a prior pattern of modest annual reductions to both levies.
