With Philadelphia's wage tax one of the highest in the nation, city and state leaders are arguing over legislation that could lower the current tax rate.
City Council members and state senators have proposed bills to lower the city's wage tax rates, despite Mayor John Street's opposition to any such measures.
Proponents of the plans claim that substantially lowering the wage tax will encourage new businesses and citizens to move to Philadelphia, invigorating the city's economy.
Street, however, is opposed to such cuts because he claims they will have a substantial impact on the available funding for a wide range of city services, including police and fire services, social services and the mayor's Neighborhood Transformation Initiative.
"The mayor is not arguing that there could be long-term benefits with wage tax cuts," Street spokesman Frank Keel said. "But he remains steadfast in his opposition that no one can predict how long a lag time we might see before we start to see those... returns, and in the meantime how we can deal with the shortfalls."
In his annual Budget Address in January, Street proposed that the wage tax be frozen at 2003 rates, rather than continuing to reduce the tax after that time. The rates have been continually falling since the administration of Street's predecessor, Ed Rendell.
Councilmen Frank DiCicco and Michael Nutter are sponsoring legislation that would continue to lower the wage tax through 2007. The tax, which currently sits at approximately 4.5 percent would be lowered to 4.2 percent over the next five years. The bill also includes a stipulation that, should the city's revenues exceed 3.5 percent of what they are now, additional reductions would be made.
Despite his opposition to this legislation, Street has also said that should the city's revenues exceed a certain point, he would reinstitute some wage tax reductions.
"Councilman DiCicco would have supported a more aggressive tax cut, but didn't feel that we could get [such a measure] through City Council," DiCicco spokesman David Fitz said.
At least 12 Council members must vote in favor of the bill to override Street's expected veto. There are currently 11 supporting the legislation.
State Senator Vincent Fumo, in cooperation with 17 other senators, has sponsored more aggressive tax cuts for Philadelphia at the state level. Under Fumo's legislation, the city's wage tax would be reduced from its current level to 3.5 percent for city residents and 3.04 percent for non-residents who work in the city.
City Controller Jonathan Saidel is advocating an even more substantial tax cut than DiCicco and Nutter's bill. According to his proposal, the wage tax would be reduced to 3.5 percent for city residents and 3.375 percent for non-residents.
Supporters of wage cuts contend that Street's claims are over-dramatized and revenues from the cuts will outweigh any short-term cost.
"We cannot continue to let them use fear tactics," Saidel said. "Those with a dreary forecast do not understand the incentives these cuts give to businesses throughout the city... I can't believe that with his wealth of intelligence, Street doesn't believe we can run a tighter ship."
Despite their mutual support for a cut, city leaders are divided over the issue of the state's intervention in the wage tax cuts.
While DiCicco is supportive of Fumo's efforts, Saidel claims that it is not the state's responsibility to intervene in such matters of local government.
Fumo spokesman Gary Tuma contends, however, that it is indeed the state's responsibility to intervene with the wage tax because it was state legislation that allowed for increases in Philadelphia's wage tax.
In the 1932 Sterling Act, the state legislature decided to allow Philadelphia to increase its wage tax from the one percent limit put on other municipalities.
They made the decision, "as a matter of public policy at the state level," Tuma said.
