Kill the business privilege tax

Someday you might want to do business in Philadelphia. Maybe you'll even start your own company here in the city -- scores of Penn graduates have done it.

But beware, it will cost you.

Philadelphia may pride itself on being one of America's great historic cities, but it is also known as one with a rich history of being unfriendly to business. Sadly, the latter reputation has been earned through decades of municipal corruption, union strife and, most importantly, a ridiculously out-of-date tax structure.

And while the Convention and Visitors Bureau likes to boast the millions of tourists who visit the city's attractions each year, what often goes overlooked is the 250,000 jobs that have been lost in the same city over the past three decades. Philadelphia lost another 10,000 jobs last year alone, making it and Detroit the only two cities to lose jobs in the midst of the current economic expansion.

That's pathetic.

But that's exactly what you get when you mix inept leadership with one of the highest tax burdens in the nation. Oh, and that trademark smug and superior attitude that can be found only in the northeast aren't helping the cause.

You see, it is a privilege to do business in Philadelphia. At least that's the vibe coming from City Hall, where John Street and Company collect a tax on every dollar taken in by businesses in the city, whether they make any profit or not. Above all, they even have the audacity to call it the "business privilege tax."

Give me a break.

We're not talking about a tax on net income -- the city's got that covered at a hefty 6.5 percent. The BPT takes a cut out of every dollar of revenue a business earns, whether it is the flower shop down the street or mighty Comcast Corp.

Let's say, for example, your small grocery store on 12th and Pine had sales of $1 million last year, but because of the spike in tomato prices, you actually lost $25,000 over the course of the year. Come tax day, you will owe the city $1,900 in taxes just for the privilege of having your shop in the city. And that's on top of the property, wage, state and federal taxes you have to pay each year. Remember, you did not even make a profit and still paid the city's tax.

While this may not seem like a lot of money for a mom and pop operation, it is. It hits small businesses that do not have the resources to hire additional workers or make capital improvements to grow their companies.

It hurts larger employers even more.

Scott Franks is the chairman of Center City advertising and PR agency Tierney Communications. The firm employs 150 Philadelphians and last year paid nearly $120,000 just in business privilege tax.

"If I could have part of that back, that's eight jobs right there," said Franks, who is a supporter of the movement to slash the BPT.

Franks is not alone. The Greater Philadelphia Chamber of Commerce has been lobbying the city to kill the BPT for some time.

"It is a retardant to the development of businesses and jobs for our neighbors," says former Pennsylvania Governor Mark Schweiker, who now heads the Chamber of Commerce. "This is not only about the balance sheet of a business. It is about families who depend on these jobs."

In this red-state blue-state world, Schweiker, a Republican, has an ally across the aisle. Outspoken City Councilman Michael Nutter, who is widely rumored to be seeking the mayor's office in two years, has seen the light.

"It's clear I'd rather be on the red side of this issue," said Nutter, who has worked to put at least some tax cuts in place. Even Democratic Gov. Ed Rendell realizes the need for tax reform.

That's good news for Penn students who will be entering the business world before too long. City and state officials are crossing their fingers that there may be some turn in the tide of students leaving Pennsylvania when they graduate.

"We'd rather not be a net exporter of jobs," Schweiker said, indicating that tax cuts would be one "important tool" in that pursuit.

Nutter agreed that students should take note. "It may not be the sexiest conversation to have on a Friday night, but it's still important."

The issue of tax reform matters to everyone. Taking substantive steps to peel back decades of anti-business sentiment benefits all Philadelphians. And the time for action is now. The city cannot continue with the holier-than-thou attitude that is driving business out, rather than drawing it in.

Jeff Shafer is a junior marketing and management concentrator from Columbia Falls, Mont., and Editorial Page Editor of The Daily Pennsylvanian. Par for the Course appears on alternate Thursdays.

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