Philly #AVI Tax Relief Plan Should Complement Broader Tax Reform Goals

Troy Graham has an excellent piece about how the Philly Actual Value Initiative is seen by various politicians, civic and business leaders as merely the first step in a longer term push for root-and-branch tax reform.

The problem is that the Philly tax code relies more heavily on mobile sources of tax revenue – wages and business – than its in peers Boston, DC, and NYC who rely more on property taxes.

There’s an elite consensus that Philly needs to flip this around, so that property taxes are the main source of revenue for city services. Unlike labor and business, property can’t move outside the city limits to dodge the taxes. The result would be more job growth and investment in the city, and fewer companies and high-skill workers fleeing to the suburbs.

One issue people are debating is when is the right time to make a push for comprehensive tax reform. Is it better to try this year, or wait until the dust has settled from AVI first?

I’ll leave it to others to debate when is the best time to push the Great Tax Switcheroo, but I do think the key issue in the short term is first do no harm. The upcoming tax relief plan for AVI shouldn’t entrench Philly’s upside-down tax code.

Instead of raising the U&O tax, or raising the millage rate on property, the city should shift the tax burden off of buildings and onto land wealth. This is the only tax relief idea mentioned so far that is consistent with both the short-term and long-term goals of tax reform. It would reduce tax bills for the city’s poorest people – homeowners and renters alike – but it would not increase the cost of doing business in Philly, and it would not require the city to give up any revenue in the short run. In fact it would encourage more new construction and investment.