America's Property Tax Advisor

Pennsylvania - Split Tax Roll Proposed


Commercial property owners would pay higher tax rates than homeowners under a proposal by Philadelphia Mayor Jim Kenney and Pennsylvania lawmakers.


The plan would create two distinct classes of property, residential and commercial, and allow them to be taxed at different rates. This change to the state's uniformity clause would allow cities to boost rates on business real estate 15 percent higher than residential.


Plan in the Works


A bill to enact a constitutional amendment to split the tax roll is expected to be introduced this session by a bipartisan group of lawmakers. To become law, it would have to pass the state Legislature in two consecutive sessions and then be approved by voters.


Meanwhile, Mayor Kenney has also proposed cutting the business income and receipts tax (BIRT) and the wage tax to help offset higher commercial property taxes.


The BIRT rate would be reduced from 6.41 percent to 6.15 percent by 2021. The first $100,000 in receipts would be tax exempt. The wage tax would fall from 3.91 percent to 3.73 percent over a five-year period for Philadelphia residents. For nonresidents, the tax would go from 3.348 percent to 3.33 percent.


Pro and Con


The proposal has won backing from a coalition of business leaders who say it would help drive economic growth and development.


"Business leaders and commercial landlords are stepping forward to support a commercial real estate tax increase upfront as an investment in growth," Mayor Kenney explained.


However, members of the Philadelphia City Council have reservations about making the higher tax on commercial property contingent on lower BIRT and wage levies.


"This radical, and to council's knowledge, unprecedented proposal would irrevocably tie the city's hands in an ill-advised manner. It is the complete opposite of what is needed because it would only restrict the city's flexibility," a council resolution stated.