Tired of tech companies relocating to the suburbs when they expand?
Philly City Councilman Bill Green introduced a bill last Thursday that targets this phenomenon: software companies will only pay taxes on sales made inside the city, regardless of the location of their headquarters.
Currently, companies inside the city must pay taxes on all sales — both inside and outside of the city. Under Green’s proposed bill, software companies would not have to pay taxes on sales made outside of the city, said Green spokesman Richard Doran.
Green hopes this will incentivize companies to stay inside the city — part of a city tax reform effort that is changing the equation in the city-suburbs conversation. But will this effort last?
Recently, real-time feedback startup Yorn relocated from Conshohocken to Center City and referred to Green’s proposed legislation as one of the reasons for the move.
The bill defines “software company” as “computer systems design and related services, computer software publishing, internet publishing and broadcasting, internet web services provider, data processing, hosting and related services, and financial transaction processing and clearing,” according to a press release.
Why the focus in the software space? In the past, Green has expressed his interest in the technology community because of the opportunity to scale white-collar jobs through high-margin products. The city’s Startup PHL initiative has made a similar pitch, a claim that is often joined by a sense that interest follows movement, whatever movement that may be, and the technology community broadly has some movement here.
There is a risk here — one that is often played out in business attraction and retention conversations — that Green’s effort will be seen as a miniature version of the tax incentive arms race that municipalities and states endlessly compete in. Here, that narrative goes something like this: wealthy suburbs with better tax bases and fewer social service costs attract businesses from cities, which in turn create tax-free zones, clever subsidies and other incentive schemes, and the suburbs answer back with some combination of both.
High technology is just a newer industry fort this battle that has played out for decades.
In this case, Conshohocken has long been a benefactor of city tax policy, as it has grown its own technology community (the crown jewel of which is 150-plus employee Monetate) with the sell that it is dense and near and transited enough to attract a Center City-like young professional crew, but modern, suburban and relatively privileged enough to remain relatively business friendly.
So might this policy be seen as an affront to Conshohocken and other suburban communities whose technology corridors are largely built by entrepreneurs trying to get the best of both the city and the suburbs? Or is Green’s legislation more high-minded, another in a recent flurry of broad-based efforts that have as much impact on tax code as they do in the perception of this city’s business climate?
The answer to those questions will leak out as the legislation makes its way through the deliberative process. If it can make the region net stronger, perhaps by making a denser Center City core, it could find teeth. If it is seen as regional in-fighting, the Chamber of Commerce and other groups that have big suburban contingents will do their best to stall its execution.
No word yet on how likely the legislation is to make it through, but Green’s past tax reform efforts have won success when he found common ground.-30-