PHILADELPHIA (KYW Newsradio) — Opposition to Mayor Cherelle Parker’s tax proposal emerged on Wednesday as Philadelphia City Council continued budget hearings for a second day.
Parker’s $6.7 budget proposal includes a plan to gradually cut the Business Income and Receipts Tax (BIRT).
The proposal to cut business taxes as a job growth strategy has been controversial since it was proposed by the Tax Reform Commission last month, but another part of Parker’s tax package that drew scrutiny — both from Council and during public testimony — was her proposal to eliminate the exemption to the business tax for the first $100,000 dollars in sales.
That’s kept an estimated 120,000 small businesses from the cumbersome work of even having to file a return. In her budget address, Parker said that a court had ruled that the exemption violated the state tax “uniformity” law. Finance director Rob Dubow told Council that fighting the ruling could have dire consequences.
“In the worst case scenario, the whole BIRT would be declared not an enforceable tax,” said Dubow. “Not only would we lose the tax but we’d have to pay back three years of the tax.”
Councilmember Rue Laundau was unconvinced. “I’m concerned with this notion that we are absolutely definitely going to lose this lawsuit. I’m one that wants to take the chance and go fight it.”
She’s not alone. Councilman Nic O’Rourke also rejected the argument, citing a recent decision against retroactive payments.
“For those who are concerned that we would have to pay back if we lost,” he said, “that’s not the case according to the Supreme Court.”
O’Rourke plans to co-sponsor legislation that would not only keep the exemption but would double it. That idea was endorsed during public testimony by public interest lawyer Jon Stein.
“The city should not be throwing in the towel when the state Supreme Court has not ruled on this,” he said.
Natalia Barkley of the Hispanic Chamber of Commerce testified her support for the rest of the mayor’s tax plan, but not ending the exemption.
“One hundred and twenty-thousand businesses, many already operating on a razor-thin margin, will have to pay regardless of their profitability,” she said.
While many of the witnesses urged the city to continue to fight the case, eliminating the exemption could turn out to be one of the toughest fights in the budget.