City Councilmember Kendra Brooks’ long-shot bid to create a new wealth tax in Philadelphia got a boost of star power Tuesday from Sen. Elizabeth Warren (D., Mass.), the former presidential contender who has pushed the policy proposal on the national level.
“The tax system in America is broken, and it allows the rich and the powerful to make themselves richer and more powerful at the expense of working families,” Warren said at a virtual news conference with Brooks. “These proposals are popular with Americans, and they’re popular because Americans understand that the tax system is rigged.”
The public push for the tax comes two days before Mayor Jim Kenney is scheduled to deliver to Council his budget proposal for the fiscal year that begins July 1, kicking off months of negotiations between lawmakers and the administration over Philly’s tax and spending plans.
Proposals labeled as wealth taxes have taken various forms, but they generally assess a levy on a percentage of the value of an individual’s financial holdings, rather than taking a cut of their wages, as the federal income tax does, or a percentage of their earnings from investment sales, like the capital gains tax.
Brooks faces an uphill battle in getting the levy approved. She has already proposed a separate wealth tax bill, only to see it fail to get called up for a hearing.
The new proposal, which Brooks plans to introduce at Thursday’s Council meeting, would tax Philadelphians at a rate of up to 0.4% of their direct holdings in stocks and bonds. (Direct ownership of stocks, which only about 15% of Americans have, is different from the indirect holdings that about half of Americans maintain through mutual funds, exchange trade funds, and most retirement accounts.)
Brooks’ office said the tax could net $150 million to $400 million per year. The current city budget is $5.4 billion.
Brooks and Warren were joined at Tuesday’s event by Councilmember Jamie Gauthier and leaders of Philadelphia’s unions for non-uniformed city workers, District Councils 33 and 47 of the American Federation of State, County and Municipal Employees.
While much of last year’s city budget negotiations focused on spending — such as how the city allocates its federal pandemic relief funds, and how much it spends on programs to reduce violence — this year’s talks are likely to include just as much discussion about taxes thanks to a soon-to-be-released reassessment of real estate values, the ongoing push to reduce the much-maligned wage tax, and proposals like Brooks’ that are aimed at shifting the city’s tax burden toward the wealthy.
While a wealth tax may be unlikely to pass in the current Council, progressives are hoping Brooks’ push for the levy could shift the center of gravity in the perennial debate over Philadelphia’s tax structure, which for years has been centered on how quickly the city can cut its wage and business taxes without driving up property taxes.
Critics of the policy said it will drive wealth out of the city.
“This kind of policy will only serve to increase Philadelphia’s already unfortunate reputation for being too highly taxed,” the Inclusive Growth Coalition, a business group that includes the Chamber of Commerce for Greater Philadelphia, said in a statement. “Not only will increasing taxes like this not convince people to stay here, it disincentivizes others from moving and working here.”
Many Pennsylvania cities and towns, including Philadelphia, had local levies on financial holdings known as personal property taxes until the 1990s, when wealthy individuals and financial institutions revolted.
Philadelphia abandoned its tax in 1997 as banks threatened to leave the city and a lawsuit against Montgomery County’s personal property tax by billionaire Walter Annenberg, the late owner of The Inquirer, made its way through the courts.
Kenney, who was a Council member at the time, introduced the bill to repeal the tax.
A year later, the Pennsylvania Supreme Court ruled in the Annenberg case that part of the personal property tax — a provision exempting holdings in Pennsylvania-based companies from the tax — was unconstitutional.
In the process, however, the court upheld the right of local governments to tax individual wealth, and Brooks said it was time to revive the policy, pointing to studies showing that U.S. billionaires vastly increased their wealth during the pandemic.
“It’s time that the ultra rich and 1% pay what they owe Philadelphia,” Brooks said. “We can choose to make deep investments in working-class neighborhoods that have been disproportionately impacted by the pandemic and by decades of disinvestment. We can choose to make everyone pay their share. And we can choose to fight for the city that our kids and grandkids deserve.”
Brooks and Warren’s partnership goes back to Brooks’ 2019 victory, when the Massachusetts senator gave an attention-grabbing endorsement of Brooks during her historic win as the first third-party Council member in modern Philadelphia history. Brooks is a member of the progressive Working Families Party, which endorsed Warren’s presidential run.
Despite Warren’s loss in the 2020 Democratic presidential primary, her signature policy idea has gained traction on the left. President Joe Biden last week unveiled a “billionaire minimum income tax” in his budget plan that would establish a 20% minimum tax rate for Americans with more than $100 million in assets. This group now pays an effective tax rate below that level due to tax breaks that are disproportionately enjoyed by the ultra-wealthy.
Correction: An earlier version of this story incorrectly stated that Council President Darrell L. Clarke declined to refer Brooks’ first wealth tax bill to committee. Clarke referred the bill, but it was never called up for a hearing.