Council eyes wage-tax rise to fill $1.4B budget hole

City Council is pushing back against Mayor Nutter's stance that temporarily raising property and sales taxes is the best way to cope with the city's fiscal crisis.

Some members want to consider a temporary wage-tax hike as part of the plan to combat a $1.4 billion budget gap over five years. Next week, Council President Anna Verna will take the first step in the convoluted process required for the city to raise the wage tax.

Verna has circulated a resolution, to be introduced April 16, asking the finance director to verify whether city tax collections have dropped by more than 2 percent. Under state gaming law, that condition would allow the city to raise the wage tax.

Councilman Bill Green said that Council must determine if this is an option. "The purpose of the resolution is really to begin the discussion," said Green.

Because the city's cut of the state gaming revenues is set aside for wage-tax relief, it may raise wage taxes only under certain conditions.

At least 10 of the 17 Council members must approve and the Pennsylvania Intergovernmental Cooperation Authority must confirm the city budget numbers. Among the financial conditions that must be met: a drop of total tax collections by more than 2 percent.

Finance Director Rob Dubow said he hadn't done the analysis, but said the city was around the 2 percent mark. But he warned against an increase, saying it could hurt jobs.

"We really do think that the wage tax winds up being a tax on jobs and will cost us jobs," he said.

The wage-tax rate is 3.93 percent for residents and 3.5 percent for nonresidents. Nutter last fall froze planned reductions in the wage tax. The tax is expected to continue to decline, due to gaming tax relief. Philadelphia has received $86.6 million so far in casino revenues.

An increase could be a tough sell, according to state Sen. Jay Costa, D-Allegheny, minority chairman of the Senate Appropriations Committee.

"Although there are triggers in existing state law that could give the city some flexibility to raise the wage tax . . . I don't think it would be good public policy, and I question whether it would gather much support in Harrisburg," he said in a statement. *