View a larger version of the above interactive visualization here.
There are only four things you can tax in this world — people, income, business and property — and only one of them can’t move.
So goes the old saw, but because Philadelphia property taxes are so low relative to other cities and their suburban counterparts, no one has much fought for a better system. It might seem like lobbying for an increase in taxes on home ownership, something of which Philadelphia has a very long, proud history [PDF].
Until now, that is, as city leadership is inching its way toward the Actual Value Initiative for city property assessments. To that end, the Philadelphia research arm of the Pew Charitable Trusts released a report last week on how and why the real estate tax system here has become so muddled, hoping to inform its correction. (Find NewsWorks and Inquirer coverage.)
That report comes on the heels of the Residential Taxes research that Pew dropped in September, noting that the city-suburban tax divide was shifting, as depicted in the visualization above. The relationship between the two should not be lost.
The Residential Taxes report from Pew — coverage from NewsWorks and Inquirer — served to compare the relative tax burden for residents in the region. The report is worth reading, but here are some of the top level takeaways:
- “From 2000 to 2012, the residential tax burden fell in Philadelphia and rose in many suburbs, leaving the city more competitive on local taxes with its neighboring municipalities.” — “In 2000, compared to the taxes imposed on noncommuters in the various suburbs, Philadelphia imposed the region’s third highest tax burden on residents [of 237 municipalities]. In 2012, it had the 48-th heaviest burden” Also think about these changes and look at these definitions.
- If you work in the city, your tax burden is lowest now, on average, if you also live in the city. — Previous to 2000, workers in the city had a slight tax advantage if they lived over the city border. Today, that has changed in the city’s favor. Still, it’s cheaper for noncommuters in many suburban municipalities. The worst off are people who live in the suburbs, many of which had tax increases, and who work in the city, which still has a nonresident wage tax.
- “Key drivers of the change were higher local income and property taxes in some suburbs, falling wage taxes in Philadelphia and undervalued property assessments in Philadelphia compared to suburbs, where assessments more closely reflected rising home values through most of the 12-year period.” — “Twelve years ago, Philadelphia’s effective property tax rate was about 24 percent lower than in the suburbs. In 2012, it was 46 percent lower.”
- “Between July 2000 to June 2009, when the [city wage tax] rate cuts were put on hold in response to the recession, the city had reduced the tax rates by about 17 percent for residents, to 3.928 percent, and by about 14 percent for nonresidents, to 3.4985 percent. The city’s annual wage tax rate reductions are set to resume in July 2013.
- Among each state’s most populous cities, Philadelphia is at least one of the 10 most taxing municipalities for a family making $50,000 — If not higher, depending on what property tax assessment is used for projections.
Property tax reform is a major part of the current progress in Philadelphia’s competitiveness improvement, so any reform there needs to be taken very seriously.
Much of this conversation can be seen as only the predictable suburban-city divide, and while proponents of cities and density can see value here, this chatter goes beyond it.
The perception of the dense urban core around which this region is based is inextricably linked to its success. Strengthening the core, strengthens the region. So that final bullet point above — in which Philadelphia still struggles even when compared to other big cities — is critical, and the interplay with its suburbs is foundational.
At the most top-level, the City of Philadelphia’s dank tax reputation is largely moving in the right direction but two enormous question marks remain: City Council’s return to property tax reassessment in the spring and the intractable question of the services provided for those taxes paid. (On the second question mark, until most neighborhoods feel they have adequate school choice, the tax question will be just a part of the dialogue with the comings and goings of residents, no matter how good trash pickup is or how many bars and restaurants there are. But the cycle remains difficult to break, as Philadelphia’s underfunded pension fund and severe poverty cost greatly.)
But the tax balance seems nearly attainable compared to those other intractable problems. As the Pew report concludes: “Ultimately, Philadelphia’s challenge is finding the optimum level and mix of income, sales and property taxes.”