In Philadelphia, budget season is often a time of tough choices and unpleasant compromises. This year, however, a $750 million infusion of federal money gives the city some breathing room to make progress on one of Philadelphia’s long-term problems.
It is no secret that Philadelphia is a difficult place to do business. Philadelphia has fewer small and midsize businesses per capita than every other major American city. We have one of the largest disparities of business ownership between Black and white residents in the country, and the Philadelphia suburbs dominate the local job market to a higher degree than East Coast neighbors like Boston, New York, and D.C.
This inadequate distribution of jobs and capital in the region plays a significant role in Philadelphia’s long-term status as the nation’s poorest big city. It disconnects Philadelphia’s people from the region’s best opportunities, starves our schools of revenue, undermines public services, and pushes residents out of the city. Among those who leave, job opportunities are the top reason why, ahead of schools and public safety concerns.
Even before the pandemic, people who are actively involved in growing jobs in the city have pointed to our city’s wage tax as a stumbling block. This grim reality might become even worse in a post-pandemic world: Even the Kenney administration is assuming that 15% of suburban commuters won’t return to working in the city or paying wage tax.
One possible way to stem this tide already exists. In 2019, Councilmember Allan Domb proposed legislation that would remove the wage tax on the first $24,800 of income per household, twice the current federal standard deduction, providing almost $1,000 in tax relief to about 60,000 households. This money would help subsidize Center City commuters as they return to the office, whether they drive and park or take SEPTA, but it would be the lowest-wage workers who see decreases in their overall tax bill, not suburbanites in high-income city jobs.
Though Domb’s bill passed in Council, it remained on Mayor Jim Kenney’s desk. While his proposal should be adopted, City Council should also consider additional legislation that would broaden and expand these policies to include more Philadelphians. Domb renewed his effort with a similar bill in 2020.
This move would not only signal the city’s intent to rely less on the wage tax as a forward-thinking goal — it would also take the first steps toward a transition toward relying more strongly on property taxes, which is how Boston and other cities avoided having as deep of a pandemic budget crunch as Philadelphia.
In 2022, when the federal money runs out, commuters will have mostly returned to their offices; bars, restaurants, and sporting events will have begun contributing to city coffers again; and the city will have updated property tax assessments after a period of growth in home values. All of this will help smooth the transition to more typical levels of federal funding.
Though the horrors of the pandemic will continue to haunt the city for years to come, the federal stimulus dollars provide Philadelphia with a rare chance to fight for economic growth and to resolve long-standing structural inequalities. Philadelphia should make the most of it.