NCPA - National Center for Policy Analysis

APPLYING SUPPLY-SIDE TAX POLICY IN PHILADELPHIA

June 9, 2004

Philadelphia is one of the most heavily taxed cities in the nation, losing 250,000 jobs and 430,000 residents since 1970. Residents have increasingly demanded a reduction in a state and local tax burden that takes 14.5 percent of income (versus 9 percent in the nearby suburbs), but city politicians have refused to listen, says the Wall Street Journal.

Which is why 80 percent of Philadelphians voted in 2002 to establish a Tax Reform Commission, the sole job of which was to "recommend methods to reduce the taxes of Philadelphia residents, workers, and businesses?"

Last year that Commission recommended comprehensive tax reform, in the process giving city residents (and its political class) an education in supply-side tax policy:

  • The Commission proposed a sharp reduction in the city's crippling wage tax, which at 4.5 percent is more than twice the average of the few other urban areas that even levy such a fee.
  • It also called for axing the "business privilege tax," which allows government to tax both business gross receipts and net income.
  • Only three of the nation's 20 largest cities have a job-killing tax on net income, and one, Detroit, is phasing it out.
  • Real estate taxes also need reform, the Commission said.

Even more encouraging was the body's enlightened view of how to "finance" these cuts: "The Commission is confident that economic growth over the long run will increase tax revenues sufficiently to offset the temporary impact of reduced tax rates." It predicted the tax cuts would create 47,000 new jobs by 2010, resulting in a broader tax base that would "recapture" lost tax revenues.

If Philadelphia's Mayor listens to the Council's recommendations, the reward will be a healthy, more vibrant, Philadelphia, says the Journal.

Source: Editorial, "Philadelphia Freedom," June 9, 2004.

For WSJ text http://online.wsj.com/article/0,,SB108673496808432116,00.html

 

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