PHILADELPHIA (KYW Newsradio) — City Council members expressed concern Tuesday over a proposal in Mayor Cherelle Parker’s budget plan that would require small businesses to pay taxes from which they were previously exempt.
During a Commerce Department budget hearing, council members questioned Parker’s plan to eliminate a tax exemption on the first $100,000 of business income, a move that had previously allowed many small businesses to avoid filing at all.
Commerce Director Alba Martinez said she realized that suddenly forcing thousands of businesses to pay the tax goes against Mayor Parker’s pledge to make the city business-friendly.
“This could be seen as cutting against the grain of open for business. We understand that we are facing a reputational challenge and confusion,” she said.
Councilmember Johnson added, “It’s going to be a sticker shock for some people”.
To offset the change, Martinez said the mayor’s proposed $30 million fund would support small businesses through education and tax filing assistance.
“That $30 million is an unprecedented opportunity and investment,” she said. “It’s going to enable us to provide really high quality, deep services.”
The problem, as some council members saw it, was that while the city estimates 75,000 businesses would be affected, only 11,000 would receive those services.
Martinez responded that $10 million of the fund would help all the businesses calculate and file the taxes, noting the average tax bill due would be about $300.
The lucky 11,000 businesses selected for more help would share in the remaining $20 million.
Mayor Parker said the exemption must be eliminated due to a court ruling that found it illegal. Still, several advocates have urged her to appeal the decision and keep the exemption in place.