Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Public Policy newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (June 18, 2020, 7:31 PM EDT) -- The Philadelphia City Council gave preliminary approval Thursday to a 2021 budget, proposed by the mayor, that would raise or freeze certain tax rates to address the economic impact of the novel coronavirus pandemic.
The council unanimously approved the budget proposed by Democratic Mayor Jim Kenney, with a modification to Kenney's proposal to raise the parking tax. The council approved a version of the parking tax increase that would sunset on June 30, 2021, whereas Kenney's proposal had no sunset provision.
The budget would also freeze the city's business income and receipts tax rate and the resident wage, earnings and net profits tax rate at 2020 levels instead of reducing them.
A final vote on the budget is scheduled for June 25, Joe Grace, representative for Council President Darrell Clarke, told Law360.
Kenney thanked the council in a Wednesday statement after the proposal was approved by the council's Committee of the Whole, saying that while he was disappointed the city would not be able to make certain investments he thought were crucial, the budget would protect the city's most vulnerable residents.
"Thanks to [the] council's leadership, I believe this budget will accomplish the goal I laid out on May 1: We will keep all Philadelphians safe, healthy, and educated while maintaining core municipal services that our residents rely on daily," Kenney said.
Clarke, a Democrat, said in a statement that the budget would help "address deep social ills and other reforms in city government which were magnified by the pandemic and unrest."
Under the city's charter, the city government must pass a balanced budget. When Kenney floated his budget proposal in May, he said the pandemic would likely cause a steep drop in taxes as business activity slowed and wage levels dropped.
The parking tax would increase from 22.5% to 27% under the budget. According to a statement by Clarke's office, the version of the parking tax passed by the council will raise an estimated $17 million in fiscal year 2021.
Under the proposal, the city would freeze its business income and receipts tax rate at the 2020 rate of 6.2% until fiscal year 2024. The city's resident wage, earnings and net profits tax rate would also be frozen, at the 2020 rate of 3.8712%, until fiscal year 2024; both rates were scheduled to be gradually cut with each passing year. Kenney previously said the scheduled rate reductions would resume in fiscal year 2024.
The rate for the city's nonresident wage, earnings and net profits tax would be increased from 3.4481% to 3.5019% until fiscal year 2023, under the budget. The scheduled rate reductions would resume after fiscal year 2023. Kenney said in May that while the changes would make Philadelphia less attractive for businesses and jobs, the nonresident hike would "put the least burden on vulnerable Philadelphia residents for the amount of funds it will generate."
The raise in the nonresident rate and the freeze on the residential rate are expected to raise $17.2 million in the 2021 fiscal year.
--Editing by John Oudens.
For a reprint of this article, please contact reprints@law360.com.
