Philadelphia Mayor’s Proposal to Cut Business Taxes is Illogical and Imprudent
April 7, 2025
Kamolika Das
Local Policy Director
April 7, 2025
This op-ed first appeared in the Philadelphia Inquirer
Mayor Cherelle L. Parker’s proposal to cut the city’s business income and receipts tax (BIRT), based off the Philadelphia Tax Reform Commission’s recommendation, is illogical and imprudent. The tax accounts for a massive portion of Philadelphia’s budget: in 2021, the BIRT brought in over $540 million in revenue, nearly 16% of the city’s General Fund. This is more than the city spends each year on homelessness services, public health, the streets department, and countless other programs that directly benefit residents.
Most businesses don’t even pay this tax, and the ones that do pay a very small share of their earnings. Only around a quarter of city businesses have enough taxable sales to incur a BIRT liability, and businesses owed a median of 3.5% of their net income in BIRT taxes — or just $1,300. Very small businesses have an even lower effective tax rate.
Further, Philadelphia lawmakers have cut the city’s business taxes several times over the past decade, and businesses have already reaped windfalls from sweeping federal and state tax cuts.
Following the 2017 federal tax law, virtually every business including large corporations and smaller pass-through businesses saw substantial tax reductions. For example, Comcast saved $6.6 billion from the Trump tax law, according to an Institute on Taxation and Economic Policy study.
And in 2022, Pennsylvania lawmakers from both sides of the aisle cut the corporate income tax rate in half over eight years. This cost us — the people of Philadelphia — nearly $130 million in revenue in 2023 and will cost us nearly $1.5 billion in 2031.
It’s time for Philadelphia to try a different tactic.
Piling on business tax cuts is especially shortsighted at a time when we should be worried about higher expenses and tighter budgets. Philadelphia received more than $1 billion in federal funds in recent years that we won’t have access to going forward.
Philadelphia also receives a relatively high level of aid from federal and state governments, but Republican members of Congress are vowing deep Medicaid and public education cuts that will significantly shift costs to states and localities. If Pennsylvania drops Medicaid expansion as a result of losing federal matching dollars, the number of uninsured nonelderly Pennsylvanians would nearly double to 1.27 million people.
Budget resolutions being pushed at the federal level are likely to mean much less direct federal aid and state-revenue sharing for housing, food assistance, health care, infrastructure, etc. In other words, Philadelphia needs to raise more revenue just to maintain current public services.
The Philadelphia School District faced major funding shortfalls in recent years, fortunately, state lawmakers helped bridge the gap last year, but what happens when state dollars aren’t available? The Education Law Center has pointed out that schools need to make long-delayed improvements to student instruction and essential services.
Similarly, Gov. Josh Shapiro took leadership in redirecting state highway funds to address SEPTA’s budget shortfall but it is not a long-term solution. Funding for a rental assistance pilot program that supports deeply cost-burdened residents is in trouble.
At every turn, we need more revenue, not less.
Low- and middle-income residents will bear the brunt of these business tax cuts. These households are already, on average, paying a larger share of their income in state and local taxes than most wealthy business owners. Smart revisions to the city wage tax refund process will make it easier for eligible residents to receive benefits, but there is so much more than the city can do.
We cannot keep cutting business taxes — a practice that often benefits wealthy shareholders and foreign investors — instead of investing in Philadelphia’s low- and middle-income communities.
These cuts are not “investments” as Council President Kenyatta Johnson argues. True investment comes from generating revenue from the top to adequately fund the building blocks of society — public education, infrastructure, public health programs, affordable housing, arts and culture, and so much more.