Philadelphia on the cusp of new real estate values, again. Part 25
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Philadelphia on the cusp of new real estate values, again. Part 25
























Philadelphia Pennsylvania has been staring hard into the face of essential tax reform. Unhappily, it's been doing so since at least the late 1980s.  The newest twist was last spring's budget process, wherein new values meant to establish meaningful tax rates were delayed. 

The legislative body of Philadelphia was split into many groups with different concerns. Some Council members understood fully that their constituents had been getting away with paying almost nothing in property taxes for decades.  Some Council members were quite aware that their constituents have been overpaying for the same number of decades. Yet other Council members had a feeling that they couldn't make public policy based on numbers that didn't exist. 

So, a compromise to plug an annual budget hole was crafted that would raise taxes on the old values, as well as raise something called the Business and Occupancy tax, which is a double property tax on active business. Note that we write "active."  If the commercial property is abandoned in vacant there is no B&O tax.  Naturally, it's counterintuitive in a city that is desperate for jobs.  

As Paul Levy, executive director of the Center City District has been saying for many years now, the existence of jobs in Philadelphia's downtown is tamped down by the stresses of taxation of mobile things like wages and retail.  The situation outside the downtown is critical.  The number of workers who leave Philadelphia each day to work in the suburbs is a not inconsequential result of inaction on tax reform. 

Now, as the new legislative season starts in Philadelphia, the city still awaits the new reassessments.  The public is being told that the executive branch in charge of assessments is "fine tuning" the numbers.   It is hard to believe that a fairly routine process in 95% of the rest of the world is so fraught with difficulty.  

The steps to move the city forward away from taxing away the fruits of one's labor to the communal fruits of public assets and values cannot proceed until the values are published, vetted, and understood by the public.  At that time, what will have always appeared to be hard decisions will become surprisingly easy, as citizens and business realize that public funds should always have been raised from taxable land values and never should have been raised from the things that Philadelphia so desperately needs. 

The only way for the city of Philadelphia to meet the challenges of the future is to switch away from wage and business taxes, no matter how sentimental these taxes may seem to old command-and-control apparatchiks.  The only way to switch, is to enact tax shifting (not tax cutting and not tax hiking necessarily) onto a land value tax with a commensurate reduction of the most terrible of taxes, particularly the wage tax. 

UrbanTools and its parent organization the Center for the Study of Economics, have always known – along with dozens of other public policy studies and organizations over the decades – that a property tax based primarily on taxable land values is the most sensible, fair, and beneficial to the greater number of Philadelphians than any other proposal.  A sensitive ox may be gored here and there, but if the city goes down, we all go down.  

Like assessing the property values of a great city, this is not rocket science.

3 Comments to Philadelphia on the cusp of new real estate values, again. Part 25:

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Steven Cord on Monday, September 10, 2012 3:39 PM
Stress GRADUALITY. You don't want to suggest an immediate 100% tax-rate shift.
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Gina on Monday, September 10, 2012 5:51 PM
I remember a report from the Philadelphia Tax Reform Commission back in November of 2003 that clearly stated "Phase in land-value taxation, reducing taxes for most residents while removing a key impediment to economic development". Here we are nealy nine years later and still no movement from Council?! The full report can be read at http://www.econsult.com/files/tax_reform_volume1.pdf
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real estate agents in North Vancouver on Tuesday, December 18, 2012 6:30 AM
I’ve read very few blogs I’ve enjoyed as much as your. Thanks for sharing.This is not the first time that I am here on your blog. I learn something new each time I visit.
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