Looking at Revamping the Business Tax Code

A wise man once told me that choosing to do business in the city is a bad mistake.

Not any city, mind you. Just ours.

I'm finally starting to understand what he was saying.

On Tuesday, Philadelphia City Council held what the Philadelphia Inquirer called a "marathon" or "epic" hearing to discuss a proposal by two council members that would restructure the city's business tax formula.

Seems maybe these two council people were reflecting the wishes of their constituents. Who knows, maybe they were just bored.

What I do know is this: nothing surprises me in this town anymore. Not the fact that the city taxes bloggers. Not the fact that the city occasionally spends time, money and energy crafting gun legislation, something officials know is unenforceable since only the state can make gun laws, but they see fit to waste taxpayer funds anyway. (OK, sorry, that last one's unrelated to the topic at hand. Just seemed right since I'm in the ranting mood).

Not the fact that the Nutter administration is apparently against the business tax restructuring proposal, even though the supposed rationale for the opposition is that, in the words of our mayor, according to the Inquirer, the plan is filled with "unknown risks." God, man, isn't everything! That's called life.  

Here's how I feel at this point: I'm not ruling anything out. Maybe the proposal to almost quadruple the tax on total sales, also known as gross receipts, while phasing out the taxing of profits, or net income, is a good idea. After all, it would eliminate two separate taxes. Isn't what we currently have akin to double dipping?  

But alas, it could also spell doom: many dislike the idea of taxing gross receipts since business owners are paying up even if they aren't making a profit.

I'm not a business owner myself, so it's really hard for me to say one way or another whether or not I'd support the shift.

I do feel that having the conversation is important, so I suppose I give a little credit to council members Maria Quinones Sanchez and Bill Green.

After talking to Greg Welsh, however, I'm left feeling torn. Welsh owns the Chestnut Grill. He's also the head of the Chestnut Hill Business Association.

Welsh told me while he applauds the two council members for thinking outside the box, and challenging the current tax structure, he doesn't support the near quadrupling of the gross receipts tax, since it will hurt "those of us who have a high volume business. We're clearly the losers."

Welsh conceded that the small mom and pop type shops might benefit from the proposed change, since the bill calls for exempting the first $100,000 in sales from the tax.

But at the same time, other businesses, like his, he fears, might suffer under the proposal.

"It looks like once again the middle class … that gross more than a million a year, are going to be the losers," Welsh told me. "We may have a high gross volume, but we have a very, very low … net profit. It's grossly unfair for that population."

So, we find ourselves right back at the beginning of the argument. I guess what I still can't get over is the fact that the city is taxing both total sales and net profits.  And while I can't answer the question of whether or not this latest proposal is beneficial or detrimental, I'm sure I'm not alone in feeling that this "double dipping" is strange, at best, downright rotten at worst. 

In the end, I'm left feeling that this "business privilege" tax setup that we have isn't all it's cracked up to be. That's right: we're taxed because it's such a "privilege" to do business here. After all this talk, I'm not so sure that's the case anymore.