Building Philly's own Amazon starts with fixing this city tax policy - Technical.ly Philly

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Feb. 21, 2018 12:38 pm

Building Philly’s own Amazon starts with fixing this city tax policy

In a speech to City Council, Arcweb CEO Chris Cera says building Philly's own Amazon starts with tax policy — namely, killing the “Second Year Slap.”

Arcweb CEO Chris Cera speaks at a City Council hearing in 2014 on how local entrepreneurs view the city's schools crisis.

(Screenshot via Channel 64)

This is a guest post by Arcweb Technologies CEO Chris Cera. These are Cera's prepared remarks for a speech to the City Council's Committee on Legislative Oversight to be delivered Wednesday, Feb. 21 between 1 and 4 p.m.

Dear Councilmembers,

Thank you very much for your valuable time, and it’s an honor to be here today. My name is Chris Cera, I live in the Bella Vista neighborhood with my family, and I’m the CEO of Arcweb Technologies located in Old City. I went to Upper Darby High School, then Drexel University, then started working as a software engineer, and eventually got into business. Fast forwarding almost ten years and I was the Small Business Person of the Year for the Chamber of Commerce in 2016, that same year my company was on the Inc. 500 list of the fastest growing companies in the country (and No. 24 fastest growing in our industry).

I was able to bootstrap my company, and that means I didn’t receive any outside capital from investors, my family, or anybody else. I spend a lot of time thinking about business formation, and how kids in Philadelphia can walk a similar path as me to become more independent.

I want to point out that business formation and business attraction are two completely different goals, and I personally believe business formation doesn’t get enough attention. How do we create an environment where companies like Amazon are more likely to form here? If we had that environment, then what would stop ten companies from growing to be the size of Amazon? It seems to me that fostering the environment for startups to thrive is going to be much more scalable for us than figuring out how to solve a single company’s scalability problems.

As much as I love #PhillyDelivers as our external marketing campaign, I’d love to see #GrowTenAmazons become our internal marketing campaign.

We need to make it easier for companies to survive in Philadelphia in their first few years of business.

We have an extremely counterproductive policy where businesses must pay their taxes almost a full year in advance or else face significant penalties. I’ve affectionately been calling this the “Second Year Slap” since most people only discover this policy when they go to pay their first year of taxes. Imagine, when you pay your taxes this April, that you have to pay for the rest of 2018 in advance? How are you supposed to pay your taxes on salary when your employer hasn’t even paid you yet? It’s not possible, unless you’re already rich, or you’re lucky enough to borrow the money somehow. Every business in Philadelphia is basically loaning the city money to operate, and this continues for the life of the business. This doesn’t just impact business owners and shareholders, but everybody including the kid that rents a kiosk at a shopping mall.

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I would guess that this policy has contributed to the dissolution of hundreds of companies, and some that would be thriving in existence today. Maybe we already killed an Amazon?

Please see the document I’ve submitted which is from the PA Department of Labor and Industry website, and the latest data there is from Q2 2017. Among the Top 20 employers on the list for Philadelphia, only three of them are for-profit companies.

I believe this shows a truly systemic issue against for-profit companies in this town, and I would argue that this unfair tax policy is one of the reasons.

I’m certainly not the first person to raise this issue, and it was mentioned in Recommendation #21 by the Tax Reform Commission in 2003. I was delighted recently to discover that Councilman Al Taubenberger recently proposed Bill No. 180077 to specifically address this issue for new companies that are formed. It leaves the systemic problem for existing companies unaddressed, but it at least “stops the bleeding” moving forward. I ask you to please consider a fast approval of this legislation, and turn the “Second Year Slap” into a piece of Philadelphia history where it belongs.

Business attraction is important for our city, but I would like to see even more attention on business formation so that we can #GrowTenAmazons. That being said, I am excited by the prospect of Amazon coming here, I’m proud our city came together to show what this town of underdogs can do when we come together, and I’m excited that Amazon has put us on the national stage (where we belong).

Thank you,

Chris Cera

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