Council wage-tax push gets H'burg cold shoulder

A City Council push to consider increasing the Philadelphia wage tax is being met with open hostility from three of the four legislative caucuses in Harrisburg.

That could spell trouble for Mayor Nutter, even though he opposes a wage-tax increase, because he needs approval from the Legislature for two key points in his budget plan - to increase the local sales tax and delay the city's pension plan obligation.

Senate Majority Leader Dominic Pileggi, a Delaware County Republican, told the Daily News that he would "strongly oppose anything that would have the impact of raising the Philadelphia wage tax."

The wage-tax rate is 3.93 percent for city residents and 3.5 percent for nonresidents.

Because the city's cut of state gaming revenues is set aside for wage-tax relief, the city may raise wage taxes only under certain conditions. Among the conditions is that city tax collections must have dropped by more than 2 percent.

Council President Anna Verna is circulating a resolution, to be introduced tomorrow, asking the finance director to verify whether city tax collections have dropped by that much.

"I think the mayor did say all options would be on the table, and this is an option that Council members feel should be considered," Verna said.

But state Sen. Jay Costa, an Allegheny County Democrat who replaced former Sen. Vince Fumo as ranking member of the Appropriations Committee, said that a city wage-tax hike would go against the goals of the gaming law.

"My guess is that many people here would view it is a violation of trust, and in conflict with the tax-reduction goals of the gaming law," Costa said in a statement.

And Steve Miskin, a spokesman for House Minority Leader Sam Smith, a Jefferson County Republican, predicted a "heated debate" in Harrisburg if the city tries to raise the wage tax.

"Suburbanites really have no say in Philadelphia's overspending over the years," Smith said. "So the question arises: Should they pay more than they already do?"

State Rep. Dwight Evans, House Appropriations Committee chairman, said that he told Nutter and Verna in a meeting yesterday that he could not predict how Harrisburg would respond to a wage-tax increase. Evans said that he urged the mayor and Council to "decide among themselves first and come to Harrisburg as a unified force."

Nutter's budget relies on a two-year increase in property taxes, a three-year increase in the sales tax and an extension of the city's pension obligation. The pension portion of the plan would save the city $331 million over five years by extending the time required to make payments into the pension fund, thereby reducing annual costs.

Pileggi also has concerns about the city's controversial Deferred Retirement Option Program.

Six members of Council are enrolled in DROP, which allows city employees to set a retirement date four years in the future and then start accumulating pension payments, with a guaranteed interest rate, that are eventually paid out in lump sums.

That seems "overly generous" to Pileggi, who wants the city to take action on DROP if it wants his support for increasing the sales tax and pension changes.

"Those are the kinds of questions that we'll have to take a look at before taking any action for the city," Pileggi said.

Disagreements on how Harrisburg will react to city taxation proposals spilled over into a Council budget hearing yesterday.

Rob Dubow, Nutter's finance director, said that the administration had been in touch with legislative leaders about how a wage-tax increase would be received.

"What we've been told is there will be a severe negative reaction," Dubow said.

Councilman Bill Green countered that Harrisburg was concerned only with the construction of two long-delayed casinos in the city. The Nutter administration has announced support recently for the projects.

"We've spoken to legislative leaders, too," Green said. "And they've told us that as long as we're building casinos, it's not going to be a problem."

Dubow and Green both declined to identify which legislative leaders with whom they'd spoken. *