Business is the heart of any city. It provides the rhythm a city needs to survive and prosper. Philadelphia policymakers do not seem to understand this. They have been taxing businesses out of the city limits for decades.
The tax in question is the Business Privilege Tax. The first part of the BPT taxes a miniscule percentage of all the money a business makes before expenses are taken off, or its gross receipts. This rate changes from year to year, though it currently stands at 0.154 percent, according to Dave Dorman, an auditing supervisor in the City’s Department of Revenue.
The second, much heftier tax is placed on profits and stands at 6.5 percent. If this tax were also levied outside of Philadelphia, it might not be as damaging. However, a business must only pay taxes on business that actually occurs within the city limits. If, for example, you have a business property in Philadelphia, but do all your actual business elsewhere, you only pay the BPT on your property. With that in mind, you might as well take your entire business elsewhere, and not pay the tax at all.
“I don’t think the mob charges 6.5 percent for protection, but we do,” said Brett Mandel, executive director of Philadelphia Forward, a tax reform organization. “It depresses rental rates because no one wants to rent here,” if there is no business.
Some will argue that if the city does not get its taxes from the BPT, then it will get it elsewhere, and it does not matter how the money is taken.
“The fear is that cutting taxes means the city loses tax revenue,” Mandel said. “When in fact our revenue has been increasing.”
Herein lies the flaw in the argument that cutting taxes means losing revenue. If you cut taxes, the city becomes more attractive, or at the very least, less unattractive to potential businesses and residents. With a larger tax base, you can get just as much money out of the city, but each individual does not feel the pinch as much.
Fame Amzovski has been feeling the BPT for more than two decades. Amzovski, owner of Fame’s Pizza on the 12th Street food vendors pad, has been on Temple’s campus since 1985.
“If I were a large corporation, I would leave, too,” Amzovski said. “I could keep all the money the BPT takes and put it into expanding the company.”
Most of the businesses in North Philadelphia are not corporations with the option of leaving, however. Phasing out the BPT would not only bring in new business and stem the steady trickle of jobs from Philadelphia, but also provide a boost to the rhythm of this city.
Stephen Zook can be reached at email@example.com.