Gloves Come Off in Business Tax Battle, Green vs. Butkovitz

BukovitzOne day, we might straighten out taxes in Philadelphia, stimulate growth and create a utopia of small businesses, with jobs available for all. But if it happens, it won’t be without a fight, because the major players can’t agree on how to do it. Now, it’s starting to get personal.

Today, City Controller Alan Butkovitz weighed in on the Bill Green/ Maria Quiñones-Sánchez business tax reform bill currently before Council, holding a press conference to express his dismay over the results of a Finance Department analysis of the plan that found 793 jobs in certain industries could potentially be eliminated under the new rules (1,013  might be created in other fields, according to the report) (For a video of the press conference check out the front page of the controller’s website).

To me, killing off these jobs is so bad, and the destabilizing effects on business are so bad that whatever else theoretically might be accomplished on the margins is overwhelmed by those factors,” the controller said in an interview, “I think there’s a fundamental problem in the idea that government should choose specific industries to reward or kill off. We’re operating in a market based economy here.”

The Green/Sánchez bill would eliminate the net profit portion of the business tax and increase the gross receipts portion from .14 to .53 percent– for a more in depth take see our look at the plan from last spring. The Finance Department tore the bill apart last week, claiming it would reduce tax revenues by $23 million annually, helping out law firms and pharmaceutical companies (among others) at the expense of construction and hospitality (among others).

Green cries foul.”The jobs analysis they did is completely unscientific and flawed from beginning to end,” the councilman says.Basically they assume that all businesses that are going to be impacted have 100% of their jobs in Philadelphia county. We are doing a shift of the tax burden from Philadelphia-based businesses to businesses outside Philadelphia.” Green points out that the finance report included non-profits as losers, whereas they shouldn’t be affected by business tax, and neglected to include manufacturing and the self-employed as big winners.

“The reality is, this is a complex issue and what we are doing is leaving $120 million more in the local economy,” Green says of taxes that would shift to companies headquartered outside the city. “That will create jobs because that money will be spent in restaurants, in museums, etc.”

Butkovitz is unswayed. “They’re putting at risk existing jobs in construction for the possibility of creating law jobs,” he says. What’s more, he adds, “the whole procedure of fast tracking this stuff is destabilizing. Business wants reliability.” The Council bill is a sharp shift from Mayor Nutter’s stalled plan to get rid of the gross receipts tax altogether. “The consensus has been to eliminate the gross receipts tax because if you’re on a narrow profit margin, the tax can tip you over and finish you,” the controller says. “It’s disturbing to businesses to think that there can be sudden reversals in policies like that.”

Rest assured that this won’t be settled without some harsh words. “Basically the controller has not studied the issue and does not understand the issue and shouldn’t really talk about it until he does,” Green says. “It’s disappointing to see the controller embarrass himself like that.”

All he’s saying is he’s cooked up some kind of proposal and he has some internal numbers that he believes are strong sales points and if you aren’t mesmerized by those sales points he says you simply haven’t studied it at all,” Butkovitz hits back.

The bill is sitting in City Council right now with 15 co-sponsors. We haven’t heard many peeps from other council members yet about potential fallout from the finance analysis, but we can’t wait to see how everything plays out. All we ask is that an exciting political pissing match doesn’t get in the way of finding the best tax policy to draw jobs to Philadelphia.

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