The city is about to make major changes to the way it collects business taxes—which could potentially become law by the end of the year—but are businesses paying attention?
To briefly recap: Council members Bill Green and Maria Quiñones-Sánchez have proposed a bill that would eliminate the net-profit portion of the business-privilege tax (currently at 6.45 percent of declared profits) and nearly quadruple the gross-receipts portion (from .14 percent to .53 percent of total revenue), while exempting the first $100,000 of receipts from taxation. Of 89,000 business-tax payers in the city, Green says about 50,000 will be taken off the tax roles under the exemption, while the remaining companies will pay more. The idea is to shift the burden from small, Philly-based businesses to large companies headquartered outside the city that use loopholes to avoid paying profits tax.
The Nutter administration says that plan won’t work, citing a recent Finance Department report that essentially calls the proposal a giveaway to law firms at the expense of the hospitality and construction industries. Green says the finance report is crap, based on faulty numbers and assumptions, but City Controller Alan Butkovitz counters that the Green/Quiñones-Sánchez plan is a dangerous break from precedent with unknown consequences.
Regardless of the shape reform takes, it is critically important to the future of the city. A thriving business climate means more employment and more opportunities for hard-working entrepreneurs. There are a lot of tough words going back and forth between politicians right now, each claiming they know what’s best for Philadelphia’s small businesses. Major players from construction, hotel and other industries have weighed in. But what do the small businesses themselves think? We set out to Main Street, Manayunk’s quirky commercial corridor, to find out.
Say what you will about self-absorbed yuppies who shop at high-end furniture stores and novelty craft boutiques, but Main Street actually brings money into the city, attracting our affluent neighbors from the Lower Merion suburbs just across the Schuylkill River. What’s more, a surprising number of the shops on Main Street are independently owned small businesses. In other words, this is exactly the kind of place the Council bill is designed to help.
So why has no one on Main Street heard of it? Of the 20 or so business owners interviewed, few knew of its existence and none expressed strong feelings about it.
The business-privilege tax is just one of many paid by companies into the city’s perpetually empty coffers, on top of sales taxes, wage taxes, real-estate taxes, use and occupancy taxes plus specialty levies for products like parking and smokeless tobacco. Are Philly’s small-business owners so weary of the oppressive tax burden that they can’t even muster the enthusiasm to pay attention to a potentially game-changing reform?
“I’m for whatever’s good for small business,” shrugs Davida Levin, owner of Worn Yesterday, a 24-year-old Main Street landmark. Levin says she had once considered moving to the Ardmore suburb for its simplified tax structure, but in the end decided to stay in the city. “It’s hard to leave when you’re established,” she says. “It costs you a lot more to be in Philly, so you have to really like it.”
Miles Bond, owner of the Octavio Miles Boutique, suggests paying the less of the two business-privilege taxes because “for a lot of folks in business, you’re barely breaking even. I guess it depends on how much you’re making altogether.”
Akos Racz, who has owned the Volo coffee shop since April, pulls out a calculator to see how he would save more money. “I’d like to see them get more money out of those companies [headquartered outside Philadelphia], as long as it doesn’t put me out of business,” he says about Green’s justification for the reform.
“The more money you make, the more money you should pay,” Racz considers, plugging in figures. Finally, he gives up—for the moment—admitting, “I’m not sure what would be best.”
“It’s typical,” says Sharrieff Ali, overhearing the conversation in the coffee shop. Ali has owned the Consult Energy Efficient Design company in Center City for three years now and gripes that Council has not done a good job getting the word out about the bill. “If they win the proposal, if it goes through, it doesn’t mean it really has the kind of support that they would like people to believe that it did.”
He says the city, or Council, needs to do a better job marketing the potential changes. “Essentially, they need to let business know what the proposal is all about,” Ali says, suggesting that Council set up a website with a calculator for businesses to use.
But there is: forwardphiladelphia.com. And Green says he spent all summer meeting with various chambers of commerce, banks, contractors, developers and more. “We’ve basically met with every single person we thought would be a stakeholder,” he says.
Somehow, Main Street seems to have missed the message.