City Council voted on Wednesday to approve a bill that will lower Philadelphia's wage tax by at least four percent over the next five years.
Mayor John Street has stated that he will not veto the bill, despite his earlier opposition to any reductions in the wage tax.
"The mayor has accepted the Council's decision," Street spokesman Frank Keel said. "He is looking forward to an era of partnership with the very entities... that supported" the tax cuts.
Bill 92 also includes a stipulation that, should wage tax revenue increases exceed 3.5 percent, cuts to the tax rates would reach 12 percent.
Annual reductions in Philadelphia's wage tax, one of the highest in the nation, have been in place since the administration of Mayor Ed Rendell, Street's predecessor. In his annual budget address, however, Street announced plans to stop further reductions in 2003.
Street had opposed reductions to the wage tax because, he claimed, they would result in significant cuts to city services such as police, fire and recreation. While cuts will still have to be made, they may be less critical, according to Keel.
"Both sides may be engaged in hyperbole," he said. "It's certainly not a doomsday scenario but the folks who said we can do this without any pain were grossly misled."
Councilmen Frank DiCicco and Michael Nutter, co-sponsors of the bill, were pleased with Council's vote.
"It is important for the city to keep moving in the right direction in cuts in the wage tax," Nutter said. "Stopping the reductions sent a message to the people that was creating a sense of doubt or fear among the citizens that we were moving in the wrong direction."
Supporters of the tax reductions claim that they could be made without significant impact on services. Additionally, they argued, tax reductions would provide substantial encouragement to businesses and citizens considering a move to Philadelphia.
"I think the mayor and the administration have the ability to manage finances," Nutter said. "The reductions can be made and still maintain high quality city services."
Proponents of Bill 92, which included the Philadelphia Chamber of Commerce, labor unions, the Philadelphia Bar Association and many others, organized a rally on Monday to voice their support. Hundreds turned out for the march through Center City. Council hearings on the wage tax bill began Monday morning.
State Senator Vincent Fumo had also proposed legislation at the state level calling for wage tax reductions in Philadelphia. Under Fumo's bill, the reductions would have been more aggressive than under City Council's bill.
While Fumo is pleased with Council's vote and Street's decision not to veto the bill, he said he would like to see Philadelphia's tax cut even further.
"We feel the city is not yet at a point where lost revenue from wage tax reductions would be so great as to be detrimental to the city," Fumo spokesman Gary Tuma said.
Fumo will not be actively pushing his proposed legislation now that City Council has approved their more moderate cuts, although he would like to see further reductions.
Fumo "is pleased that the city is back on track for wage tax reductions," Tuma said. "If other people want to... go forward [at the state level], he would vote for it."
City Controller Jonathan Saidel had also pushed more aggressive cuts to the wage tax. While he is pleased with this recent action, he said he hopes to see additional tax reforms in the future.
"I believe that the passage of this legislation marks the beginning of tax reform," Saidel said. Tax reform "is possible as long as the energy is as high as it is now and our city is committed to making change."
DiCicco agrees that Bill 92 will open the door for the possibility of additional tax reform measures.
"This is the right thing for Philadelphia, and this is just the beginning," DiCicco spokesman David Fitz said. "We'd like to see further tax reform."
