Low-income families could save about $800 a year if Philadelphia refunded wage taxes | Opinion
Philadelphia taxes its poor residents more than any big city in America.
City Councilman Allan Domb sits during a City Council meeting at City Hall in Philadelphia on Thursday, Oct. 31, 2019.Read moreTIM TAI / Staff Photographer
by Allan Domb, For the Inquirer
Philadelphia's fight to reduce the number of people living in poverty has rightly focused on initiatives and programs to provide assistance and support. Many of these efforts have helped individuals and families across the city — even contributed to the recent slight decline in the city's overall poverty rate.
But, there's still an unfair burden the city has ignored: Philadelphia taxes its poor residents more than any big city in America.
For a Philadelphia family earning $25,000 a year, the tax burden is $4,515, or 18.1 percent, according to a 2017 national comparison of tax rates analyzed by the Government of the District of Columbia. That's four percentage points higher than Chicago (14.3) and Los Angeles (13.9) and six points higher than New York City (12.2). Phoenix, which is the city closest in population to Philadelphia, is at 11 percent. The bulk of the tax burden for Philadelphia's poor comes from their income, which accounts for almost 40 percent of the total tax burden. The remaining is mostly derived from sales and property taxes.
It's time Philadelphia provides a fair system and removes one of the largest barriers that keeps our poor from ever improving their financial situation. This starts by eliminating the tax burden on income earned by low-income families by providing a wage tax refund. This will provide immediate relief for 60,000 Philadelphia households who struggle year after year.
Under the legislation I have proposed, a family of four earning an income of $34,250 would be able to receive a refund for almost the entire amount of wage tax they paid annually to the city, or about. $810. For single parents earning less than $28,000 with two children, the refund would be about $650. The refund amounts increase per additional dependent. By 2024, if the PICA portion of the wage tax is removed, the refund would increase to the full amount, providing a reimbursement of more than $1,300.
The city has the ability to cover the costs to provide these refunds. It has already shown it has the will to increase its budget by 25 percent to pay for other initiatives over the last four years, and tax revenues mostly generated through the thriving Center City economy have been significantly outpacing projections annually. We need to extend this success to the neighborhoods that need it most.
This is just one step that our city must take to help people in need. Safe neighborhoods, quality schools, fighting the infestation of drugs, and creating good paying jobs will all have to be addressed to move our city forward, but for individuals and families struggling to get by, giving them immediate assistance to pay their bills, buy groceries, and help with the day-to day-financial burden they face is something all of us should be working on.
It's time we make our tax system fairer. I hope City Council and the mayor will join me in this effort.
Allan Domb is an at-large member of Philadelphia's City Council.
Allan Domb, For the Inquirer