NCPA - National Center for Policy Analysis

A Wage Tax In Philadelphia Backfires

April 11, 2002

Not only is Philadelphia one of the most heavily-taxed cities in the nation, it is one of the few big cities to have a wage tax. It consists of a 4.54 percent payroll tax for residents and a 3.95 percent tax for non-residents.

Although the wage tax was cut in 1995, Mayor John Street wants to rescind those cuts -- and he is running into stiff opposition from diverse coalition that includes the National Association for the Advancement of Colored People (NAACP), the Chamber of Commerce, business and civic groups and the city council.

People are simply moving out to escape the tax.

  • Many experts blame the tax for the city's loss of 200,000 jobs and 400,000 residents since 1970.
  • A commercial district along the city's western border boasts 2.8 million square feet of office space -- 93 percent of which has been built on the suburban side of the street, out of reach of the city's tax collectors.
  • Analyses of earlier cuts in the tax show a 19 percent increase in revenues resulted from the cuts - a predictable phenomenon known as the Laffer Curve.

Source: Editorial, "An Urban Tax Revolt," Wall Street Journal, April 9, 2002.

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