Should the Philadelphia Property Tax Classification System Be Modified?

Abstract

This article reviews issues related to proposed changes to the Philadelphia taxation system. There are two proposed plans. The City plan proposes modest cuts to the wage tax and to the net income portion of the business income and receipts tax (BIRT). The plan proposed by the Philadelphia Growth Coalition includes larger cuts in these taxes combined with an increase in the property tax on commercial real estate. The increase in the property tax on commercial real estate is intended to make up for losses of revenue from the tax cuts and is proposed to create a property tax classification system in which different classes of property are taxed at different rates. These proposals have been studied by Econsult Solutions (2015), and their findings are scrutinized in this article. Also, this article includes information on the main example of a property tax classification system in Cook County, Illinois, as a cautionary tale.