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Philadelphia's Revised 5-Year Budget Gets OK Despite Wage Tax Dustup

By Mike Dunn

PHILADELPHIA (CBS) -- Philadelphia's much-hated wage tax was the center of a big debate today as a state financial watchdog agency approved Mayor Nutter's new long-range budget.

The controversy came as the mayor backed off slightly on plans to cut the city wage tax.

In order to pay for the new contract with the largest city workers' union, District Council 33, the Nutter administration has revised its long-range budget known as the "Five Year Plan."

One change was to scale back on scheduled reductions in the city wage tax, which bothered some members of the PICA (Pennsylvania Intergovernmental Cooperation Authority) board, including the new chairman, attorney Lawrence Tabas (far left in photo, looking down).

"If we face an increase in the state income tax next year, those two taxes alone are going to have people think twice about the City of Philadelphia, especially when you add the extra sales tax on it," Tabas said.  "Our young are starting to evaluate whether they can afford to stay in the city.  The middle class are being squeezed.  So if we don't do something soon, we could hurt the kind of benefits that we've just been realizing from the (economy's) turnaround."

Despite those reservations, Tabas and other PICA board members approved the Five Year Plan.

Rob Dubow, the mayor's finance director (center of photo), defended the decision to back off on wage tax reductions.

"We have been reducing it, but you have to trade that off against other services and amenities," he said.  "You have to balance everything out.  So we wanted to make sure that we can invest in the police force, that we can invest in Parks and Rec, because people value that, too.  So there are a whole bunch of trade-offs that you look at when you balance the plan."

But Tabas wants to see the wage tax reductions accelerate.  Otherwise, he says, the city will suffer.

"We could push out a lot more jobs and we could see a decline in employment in the city," Tabas said, "so that should be one of our priorities: to get the wage tax reductions back on line ASAP."

Nutter had needed to find about $170 million over the five years to pay for the DC33 deal and other new costs.  The revision to the wage tax reduction plan is worth about $50 million to the city's coffers, and affects fiscal years 2018 and 2019.

(The original plan had the resident wage tax in 2019 at 3.746%, but now it will be 3.797%.  The non-resident wage tax was to have been 3.3365% in 2019, but instead will be 3.3825%.)


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