NCPA - National Center for Policy Analysis


April 16, 2009

The tax-filing deadline yesterday was expected to come and go without a single company applying for one penny of Philadelphia Mayor Michael Nutter's new $5 million tax-credit program that was designed to encourage the hiring of ex-offenders.

  • The mayor unveiled the initiative on the campaign trail as an innovative way to drive down Philadelphia's crime rate, and City Council wrote it into law nearly 18 months ago.
  • Under its terms, local companies can receive tax breaks of $10,000 a year - for three years - for each ex-offender working at least six months as of Jan. 1, 2008.

This is the first tax year companies would have been able to receive the credits, which would be counted against the business privilege tax they pay the city.  But no one applied.

  • To receive the credit, companies must provide $2,000 worth of tuition support and vow to remain in Philadelphia for at least five years.
  • As for the ex-offenders, they must turn over 5 percent of their paychecks to the city.
  • The administration set aside $5 million for the tax credits, limiting the program to 500 ex-offenders yearly.

The initiative has faced a bevy of problems:

  • Some companies, in addition to not wanting to be publicly named, object that the program requires them to pay ex-offenders more that their current unionized workforce.
  • For a company to get the tax credit, it must pay ex-offenders 150 percent of the federal minimum hourly wage - which currently adds up to about $10 an hour.

"Employers don't want to set up a situation where their union employees are paid less," Gillison said.  He added that the administration planned to introduce legislation before June to address this issue and others.

Ray Jones, a director at Impact Services Corp., which helps find ex-offenders jobs, pointed to another possible impediment, saying some ex-offenders opposed giving up 5 percent of their paychecks.  Given that many have restitution and child-support payments on top of rent and food bills, he said, "it just does not make a whole lot of sense for them to buy into it."

Source: Marcia Gelbart, "No takers for tax break to hire ex-cons," Philadelphia Inquirer, April 15, 2009.


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