Nutter scales back tax cuts in revised budget

A faltering real estate market and some overly optimistic budgeting has led Mayor Nutter to slightly scale back his tax-cutting plans, thus breaking several campaign promises.

The revised five-year financial plan, which is to be presented to City Council today, includes a total of $155.8 million less in wage- and business-tax cuts than Nutter had proposed in February, senior administration officials said.

Though taxes will still be trimmed, the new goals are not as aggressive as those Nutter has long championed.

As a mayoral candidate, Nutter pledged to eliminate the gross-receipts portion of the business-privilege tax within seven years. He still plans to kill that tax, but the administration now says it will take a full decade.

And instead of lowering the resident wage tax from its current rate of 4.2 percent to 3.5 percent by 2013, Nutter now plans to trim it to 3.6 percent.

"We are slowly making the city more competitive, and that's good," said Brett Mandel, executive director of Philadelphia Forward, an organization that argues tax cuts are needed to grow the city economy. "Obviously you would want it to go faster and further, because every single day that Philadelphia maintains its onerous and unfair tax structure, we lose jobs and we lag economically."

Senior administration officials characterized the tax-cut backtracking as a tough but necessary decision, given the uncertain economy.

Nutter is not sacrificing much on the spending side, however. Investments in public safety, higher education, the park system, and other areas proposed in February remain intact.

And City Council is also getting much of what it wants in the revised budget, to the tune of about $10 million, including $1 million more for increased staffing at recreation centers, $2 million for a housing fund, $750,000 for raises for City Council staff, and $1 million for low-income heating assistance, among other programs.

To win Council approval of the budget, the Nutter administration compromised on another thorny issue: a tax credit for the working poor that was slated to take effect in 2013. Nutter's initial budget proposed eliminating that tax credit.

The credit now has been restored, but in limited form and not until the year 2014, senior administration officials said.

"At a time when they are cutting taxes for businesses large and small, it's really unconscionable that they would send the signal that tax cutting is good for everybody but the poor who really need it," said Stan Shapiro, coordinator of One Philadelphia, an organization which opposes tax cuts as a means of stimulating the city's economy.

Shapiro's organization believes the city has cut taxes too steeply already, leaving too few resources for city services.