Philadelphia’s fiscal health and tax policy affect the city’s ability to deliver critical municipal services while also retaining and attracting residents and businesses.
Pew’s work on these issues includes research on Philadelphia’s property tax collections, the state of the city’s underfunded pension system, Philadelphia’s record on preparing for revenue volatility, and whether tax incentives are producing the intended results.
For the fourth time in little more than two decades, the city of Philadelphia has a tax reform commission in place. With that in mind, The Pew Charitable Trusts convened a virtual program on July 24 entitled “What Will Tax Reform Look Like in Philadelphia?” to help policymakers ponder the work ahead of them.
In many ways, 2024 is a year of significant transition for Philadelphia. In this year of transition, the challenge is clear for Philadelphia and its new leaders: They must nurture and strengthen the positive trends while making progress on a set of deep-seated problems that can sometimes seem intractable.
The start of the COVID-19 pandemic in 2020 forced officials in cities throughout the country to deal with unexpected budget shortfalls quickly. To close a projected one-year gap of $649 million, Philadelphia was forced to take several steps—including drawing down its operating fund balance, postponing planned tax-rate reductions, temporarily increasing some taxes, and reducing spending. But that didn’t address the long-term fiscal issues.
Business taxes are a perennial subject of debate in Philadelphia. Critics say they’re an obstacle to economic growth; defenders call them a way to make businesses pay their fair share. Underlying these arguments are basic questions about how the taxes impact various businesses: Are some industry sectors hit harder than others? Do small businesses bear a heavier tax burden than large corporations? How many pay no business tax at all?
For many years, Philadelphia has awarded businesses hundreds of millions of dollars in tax incentives to encourage them to create jobs, move into distressed neighborhoods, and otherwise enhance the local economy. But the city never had a formal system for regularly evaluating and adjusting the programs.
Philadelphia has taken steps to put its underfunded public employee pension system on what will be a long road to recovery. Will those efforts work, and can the city stick to the plan?
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