Phila. business/union coalition: Raise real estate tax

When was the last time anybody said, "Please raise my taxes"?

But that was the message Gerard Sweeney, president and chief executive of Brandywine Realty Trust, one of the region's largest commercial real estate developers, delivered Wednesday at a news conference outside City Hall.

"We're prepared to pay more to make our city grow," Sweeney said.

The proposal, backed by organized labor and civic and business associations, would change the city's tax structure by increasing the tax rate for commercial real estate above the rate for homes. State law now requires all real estate to be taxed at the same rate.

The revenue from the increase would not go directly into city and school coffers. Instead, it would be used to lower two other taxes despised by the business community - the wage tax, which taxes a percentage of workers' pay, and the net-income portion of the Business Income and Receipts Tax, which taxes profit.

Sweeney and the others, joined in the Philadelphia Jobs Growth Coalition, are betting that the shift in the tax structure would encourage more businesses to move into Philadelphia, adding jobs and ultimately increasing tax revenue going to the city and School District.

They think their plan would add 50,000 to 100,000 jobs in 10 years and provide $42 million in new revenue to the schools over the first five years.

Civic leaders, such as Paul Levy at Center City District, have been beating this drum for years. Tax commissions in 2003 and 2009 recommended shifting taxes from what can be moved (wages and business revenue) to what can't move (real estate).

This time, there's a new riff on the old rhythm.

The riff is that the additional money raised through a 15 percent increase in the commercial and industrial property-tax rate would be directly applied to lowering the other taxes, assuming state legislators agreed to put the measure on the ballot and voters approved.

The plan addresses a longtime concern: If the city lowers taxes, it loses revenue. Even if lowered taxes lead to growth in the future, how does the funding gap get filled in the meantime?

"Our plan is revenue-neutral" initially to the city and schools, Sweeney said, speaking for the coalition.

Sharing the dais with Sweeney was Daisy Cruz, a top union official representing the workers who clean Sweeney's buildings.

"We sometimes go toe-to-toe with the business community on policy, but this tax reform has a goal we all share," which is good jobs, Cruz said.

Sweeney said the 50,000 to 100,000 new workers would need more space - the equivalent of four new skyscrapers, providing jobs for the building maintenance and security workers represented by Cruz's union, SEIU 32BJ, as well as for the building trades.

Those trades were represented Wednesday by Patrick Gillespie, head of the Philadelphia Building and Construction Trades Council, and John "Johnny Doc" Dougherty, who leads Electricians Local 98.

Steven Scott Bradley, chairman of the area's African American Chamber of Commerce, said his members owned small businesses and were discouraged from hiring employees by the wage tax.

Representatives from the Greater Philadelphia Chamber of Commerce, the Greater Philadelphia Hispanic Chamber of Commerce, and the Building Owners and Managers Association of Philadelphia all said their organizations backed this proposal.

Looking at real estate taxes as a portion of rent, Philadelphia office tenants typically pay less compared to other cities, Levy said. In Washington and New York, 18 percent to 20 percent of real estate rent goes to pay real estate taxes. In Philadelphia, it's about 6.8 percent.

Levy said central area rents were lower in Philadelphia than other cities.

"If it's such a competitive advantage, why isn't everyone flooding here?" Levy asked rhetorically, then answering his own question: When businesses taxes are added to rents, the costs end up higher.

Main idea: Tax commercial and industrial real estate at a higher rate than homes. Allocate increase to lower wage and business net income taxes over 10 years.

Why: Advocates say lower wage and business taxes will attract business to the city, adding jobs, tax revenue.

Rate: Increase commercial and industrial millage from 1.34 percent to 1.54 percent.

Wage tax: Cut wage tax, now 3.92 percent for residents, to below 3 percent.

Business net income rate: Half of the 6.43 percent rate.

But: State law requires all real estate - homes and businesses - to be taxed at a uniform rate.

Trick: To change the law, state legislators would have to vote to put the measure on the ballot, which would take at least two years.

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