Submitted by PhillyAccount t3_125yi8h in philadelphia
Comments
QuidProJoe2020 t1_je6t6eb wrote
Makes sense, we have extremely high wage tax and an extremely low property tax.
A tax system that incentivizes homeownership or rewards homeownership isn't a bad thing. Also, the Pew research mentioned nothing of the tax abatement system on new construction, which is another huge tax blessing to homeowners.
The best way to fix this problem is probably to make the city wage tax progressive, which is the highest in the country. So instead of taxing the same percentage to someone who makes 20k as you would to someone who makes 200k, you tax a lower rate on the low income earners. That would help make it more fair about the huge tax burden the low income renters have.
I think their calculation on property tax as effective tax rate on renters is pretty off base and not sure they properly calculate it. They purposefully did not include 13% of renters, most of which are in section 8, where there are no property taxes, in the calulation of property taxes paid.
Given one must make under a certain amount to qualify for section 8, removing these would severely impact the bottom quintile. It looks like this is probably the culprit for the weird calculations that the lowest quintile of renters pay the biggest share of their income to property taxes. Also, in the appendix the study makes clear that it often takes a few years for 100% of the property taxes to be offloaded to renters, so the automatic assumption that every renter is paying that is faulty in itself. You would have to control for only homeowners that have lived somewhere for several years to ensure the assumption is valid.
Marko_Ramius1 t1_je6xt28 wrote
I agree with most of this, except for your proposal to make the wage tax progressive. While it's good the city incentivizes homeownership, making the wage tax progressive would unfortunately have the effect of disincentivizing wealthy people from living in the city, similar to how businesses concentrate in the burbs. By nature the wage tax is highly volatile because people can just get up and leave whenever they want, versus property taxes which are tied to land. The city really needs to do all they can to reduce/get rid of the wage tax if they want to ever attract businesses en masse to the city
QuidProJoe2020 t1_je748hv wrote
Yea, I quite frankly think we should have property and wage tax flipped. Meaning our property tax should be higher comparatively and our wage tax shouldn't be the highest in the country. This is for the same reason you point out: we need to bring money into the city.
It's way more important to get 6 fig earning ppl into Philly vs helping a family afford a 700k house instead of 550k due to low property taxes. The low property taxes + the abatement program certainly exert upward pressure on house prices, which ultimately will impact rents as well.
Solid point my dude.
rovinchick t1_je7zciy wrote
A large percentage of the wage tax is paid by non-residents, so it doesn't make any sense for the city to flip them for reason alone. Even pro athletes and performers who come to Philly for a game or a show have to cough up their share of wage tax for the salary they collect while here, even if just for a day.
QuidProJoe2020 t1_jeabg58 wrote
Yes, but I bet a huge majority if not a super majority of those commuters make 6 figs+, which would put them In the highest wage tax bracket anyway. This is especially true for sports athletes.
A progressive wage tax ensures someone who makes 30k has enough to feed their family in West Philly, while not making the city lose money on the 500k law partner who commutes in from the burbs or mainline.
Every dollar a 30k earner pays in taxes is a lot more painful than a dollar paid by someone who makes 500k, this is the entire point behind a progressive system.
In terms of property taxes, idk if you have seen house prices recently but they have ballooned in 20 years. I have seen houses that were worth 25k when I was a kid now go for 150k with no upgrades. Property used to be dirt fucking cheap in this city, so high property taxes wouldn't have generated much. Now, you have 500k homes in neighborhoods you didnt use to be able to visit 15 years ago, I'm looking at you point breeze.
A switch now after huge inflation and increases in property value, whereas wages have not changed nearly as much (a big law lawyer used to start at 160k 15 years ago, now it's 185k; service workers have went from 7.25 to just hitting 15 after about 15 years) seems like it would be better to grow tax recipes via property taxes now.
rovinchick t1_jeagunj wrote
It's a good way to get that law partner to only commute in on court days and the 76ers to build their arena in Camden, too.
QuidProJoe2020 t1_jeai0ie wrote
The Law partners income gets taxed at philadelphia wage tax based on where his employer is located in the city of philadelphia. He could work from home for the rest of eternity, but as long as his employer is located at 1700 market street, he's paying his wage tax.
Also, why the hell would the 76ers move their stadium out of the city they play for due to wage taxes? 76ers org doesn't give a fuck what it's workers pay in wage tax, it cares about putting butts in the seats and getting good players. Players care about wage tax, but income tax in PA is capped at 3.07%, those same ballers will be paying the highest income bracket in NJ which is 10%. Moving stadium to NJ makes no sense based on what you are bringing up as a player will spend substantially more in taxes paying 10.75% in NJ income tax over PA state income tax of 3 and phily wage at 3.79%. Not to mention, Camden has another 1% wage income, so in total 76 players would be paying almost double in tax to play there.
Now, if the city of Camden is going to give crazy tax credits to 76ers org, that's a different thing altogether, but has nothing to do with wage tax.
rovinchick t1_jeaj675 wrote
I mean the law partners will move their firm outside the city. Even if they stay, if they have a permanent telework agreement in place where the employer specifies the days the employee is directed to work from home, they do not have to pay wage tax on earnings for those days.
QuidProJoe2020 t1_jeaki1e wrote
Bro Morgan Lewis, strategy Ronan, Ballard Sparh, etc are not moving due to wage tax. Big law firms need an office in a big city, it's literally a sign that they are a big law firm and taxes be damned.
Also, if the employer gives you the option to come in, which all big law firms do as they actually want people to come in, you are subject to wage tax.
Also, I'm not sure why this is relevant. Where did I say let's make the wage tax higher? Why are we discussing workers in Philly taking different actions than they can now if the wage tax is not increasing? All I'm literally saying is that for people who make smaller incomes, they should have a lower tax rate, not that the high earners should pay more than they already do.
Heck, I have been saying that we should invert the property and wage taxes in place. I want higher property taxes and lower wage taxes in general. Housing has appreciated way quicker than wages have. Again, homes have gone up 6x in value in just 15 years. Wages haven't even doubled let alone triple. Thus, the portion that can be tax via property tax is much bigger than it was 15 years ago. As such, it seems wise to tap that for revenue, where as lowering wage tax to invite MORE BUSINESSES into the city.
I am in agreement, our wage tax is too high. I just have no clue why in response to me saying 30k earners should pay less, you think big law partners will force telework contracts from big law firms that are super old fashion and conservative when it comes to what they expect from a work force.
rovinchick t1_jeakvf5 wrote
Not a Bro, but ok. Many business are already providing very detailed telework agreements that allow their employees to avoid paying wage tax on all of their income. Just saying it's a thing and if the rate did increase, I'm certain you would see more of these arrangements.
QuidProJoe2020 t1_jeal7cj wrote
Ok, I am a lawyer and know a lot of lawyers in big law. They all have option to work from home, and are still subject to Philly income tax.
Again, this is a moot point, no one is saying increase Philly wage tax. I'm just saying 30k earners could use some help on their tax burden, and this study shows they carry the biggest burden comparative to income out of any quintile, which makes no fucking sense.
Edit: also, everyone is a bro, it's a term that can be a greeting of endearment and is stupid to gender anything like that.
embarrassmyself t1_je7qp43 wrote
Doesn’t it already do that though? It’s so high across the board, of course high earners will try to go around it somehow
donttouchthirdrail t1_je6xqkm wrote
You can’t do a progressive tax because the state courts have ruled it as a violation of the uniformity clause
QuidProJoe2020 t1_je74ox1 wrote
Ooh very interesting. Looks like someone would have to push for a state amendment to get that change, but had no clue about that. Thanks for the insight!
I do wonder if some crafty legislation could accomplish the outcome without the amendment. Would have to fashion it as a tax credit. Maybe like living in a opportunity zone, such as low income zip codes, entitle certain tax credits. The again I'm sure rich ppl would buy a house in low income neighborhoods and use that as thier home address for it. Could cap the credit though.
Mam, tax legislation is tough lol
donttouchthirdrail t1_je75tov wrote
You could try doing a refundable tax credit for income below a certain amount, but a lot of low income earners don’t file taxes
CreditBuilding205 t1_je70wes wrote
As a homeowner who benefits from the homestead exemption, it’s incredible what renters let us get away with.
Just dropping my share of property taxes by 1/3 while renters get nothing.
To say nothing about the fact that they assess my house to be about 25% less than it’s actually worth.
Thot_P0cket t1_je74eh9 wrote
> it’s incredible what renters let us get away with.
As a renter I'm not sure what we're supposed to do about this.
PA landlord tenant laws are already pretty slim when it comes to anything pro-tenant. Hell, Georgia has better tenant protections when it comes to renting. The only state I've lived in with fewer tenant protections was Texas, and that state's landlord tenant laws are only one step removed from straight up saying "If you rent in Texas, the landlord has the legal right to bend you over at any time."
It's disheartening and so few people seem to know how bad it is in most of the country.
So yeah, I don't know what us renters are supposed to do about it.
Leapingforjoyandstuf t1_je7kw40 wrote
Yeah, I don't think there's ever been a politician to vote for who is aggressively pro renter. Just not a thing. People in charge own homes and are going to make it better for themselves. If you have enough money to own a home then congrats, but its not like anyone who doesn't own a home is in favor of the system.
emlynhughes t1_je7mtl1 wrote
> it’s incredible what renters let us get away with.
The problem is there just isn't enough of them with the political clout to make it fair.
There are states where owner-occupied homes pay reduced school taxes. Talk about being regressive toward renters.
Booplympics t1_je86rb7 wrote
Call me crazy but I think Philly would be better served by completely auditing its budget before fiddling with tax rates. Ultimately tax rates do need to be reevaluated but there is so much waste in the city government that really should be addressed first. For the amount of money the city has, our return is awful. I mean we are (supposedly) a major city that is just recently reintroducing street sweeping. It’s truly absurd.
Yes, taxes need to be reworked. But just changing where the money comes from does nothing to address the real problem this city faces. How the money is (mis)managed.
Qumbo t1_je85dh1 wrote
Can anyone explain the policy reasons behind keeping property taxes low by keeping income taxes high? Do real estate interest groups simply have city hall by the balls?
[deleted] t1_je77iq6 wrote
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New-Passion-860 t1_je6n8xa wrote
Philadelphia could follow the lead of other parts of Pennsylvania and implement a land value tax instead of wage and sales taxes. It's progressive, the most valuable land tends to be owned by the most well off. Renters already pay land rent, and this tax would capture a higher proportion of it instead of raising it since the supply of land is fixed.
If that step is too big, a switch to a split rate property tax that taxes buildings less than land would also help. This would benefit renters, since property tax on buildings does raise rents unlike the portion on land. It would lower property tax for many homeowners. It would help raise the supply of housing. https://whyy.org/articles/a-progressive-approach-to-taxing-land-gains-traction-in-philly-council/