Increase in city taxes will likely not have big impact on spending habits

The issue of rising taxes is grabbing attention across the state. And though these increases will hit home in Philadelphia, students, professors and business owners alike say they do not think it will change spending habits.

The City plans to raise taxes in order to close the budget gap and balance the City's finances.

Sales taxes are planned to increase by 1-percent in Philadelphia - from 7 percent to 8 percent.

After over two months of a major budget impasse, state legislators finally reached an agreement on Pennsylvania's budget Friday night.

The proposed $27.9-billion budget calls for an increase in business and cigarette taxes as well as legalization of table games such as blackjack at casinos to make up for government deficits.

The budget plan would also impose a sales tax on concert and museum tickets to generate revenue for a cultural institutions and the arts fund.

Yet the economic effect of these new taxes on the population should be "trivial," said Wharton professor Robert Inman, who specializes in public finance and urban fiscal policy.

Although retail stores in Philadelphia do not embrace the proposed tax, some stores feel as though the 1-percent increase is trifling.

Henry Wong, owner of Furniture Lifestyle on S. 36th Street said he does not think the increase in taxes will not affect the store's revenue.

"We sell better goods with better prices," Wong said.

Since the store is an eclectic one that offers unique merchandise, he said, higher taxes "will not push customers away."

In fact, the store is offering a 50-percent discount on decorative figurines and desk lamps this month in honor of its recent opening.

At the same time, though, lower taxes in neighboring cities could spur a border effect, according to Inman.

Some may travel outside the city's limits in order to purchase items with a tax rate that is 2-percent lower.

Others, however, will continue to shop in their usual stores, despite the 1-percent increase.

"I'm not going to travel all the way across Philadelphia to purchase something I know will only be 2-percent cheaper," Wharton and College sophomore Patrick Elyas said.

The marginal increase in state taxes doesn't seem to adversely affect Penn students either.

According to the new budget plan, Pennsylvania will institute a limited tax increase of 25 cents on each pack of cigarettes.

"Smokers will still smoke," Inman said.

Despite the continuing rise in prices, a College senior said she would continue to purchase cigarettes.

"As sad as it sounds, I need my daily fix no matter what the price is," she said.

This article has been updated to reflect the correct amount of the sales-tax increase. We originally said the tax was moving from 6-percent to 7-percent.

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