>From today's Daily News. If something like this wacko scheme cooked up by
Councilmembers Green & Quinones-Sanchez passes:
* forget about capital improvements, financed in whole or part out
of current income or paid-off with the same;
* forget about making a profit in a business (like rentals) that's
not based on a mark-up between the cost paid for goods and the income
received by selling them;
* check all of your leases so you'll know when they're up for
renewal and can be sure to raise rents and add "utility fees" to compensate
for
the fact that you'll be taxed on receipts but won't be able to deduct the
costs of running the buildings.
This scheme is, to put it as kindly as possible, lunacy.
-------------------------------------------------------------------------
Alan Krigman
KRF Management, ICON/Information Concepts Inc
211 S 45th St, Philadelphia PA 19104-2918
215-349-6500, fax 215-349-6502
krf...@aol.com or al.krig...@krf.icodat.com
____________________________________
____________________________________
Council members' plan would change business-tax structure
By CATHERINE LUCEY
Philadelphia Daily News
_luc...@phillynews.com_ (mailto:luc...@phillynews.com) 215-854-4172
WHEN JOE WEISS, chairman of the software-design firm Electronic Ink, heard
about business-tax legislation cooked up by two freshman City Council
members, he was shocked.
"When I heard the proposal, I was incredulous," said Weiss, whose Center
City firm employs 80 people.
And for good reason. Council members Bill Green and Maria Quinones-Sanchez
have been working on a plan that would reverse a 14-year effort to reduce a
tax on businesses' gross receipts.
But after a conversation with Green, Weiss has come around, at least part
of the way.
"I talked to the councilman and I listened to his explanation, and now I
have an open mind to listen," said Weiss. "He presented some numbers that
made it look like his position is a positive one."
For Green and Quinones-Sanchez - who are expected today to introduce
legislation that would radically change the city's business-tax structure -
hearing that someone like Weiss has an open mind is probably a good start.
How it works
The city's business-privilege tax has two parts - a gross-receipts portion,
which taxes firms on their sales, and a net-income portion, which taxes
profits.
Based on a long-held belief that the gross-receipts portion is unfair
because it charges businesses even when they lose money, Council and the mayor
have been gradually reducing the gross-receipts tax since 1995.
But Green and Quinones-Sanchez argue that the current setup penalizes
city-based firms and lets national retailers get away with paying little or
nothing. That's because the tax on profits applies only to businesses
headquartered in Philadelphia. Big chains, like Home Depot or Wal-Mart, pay
nothing
because they aren't based here.
Green and Quinones-Sanchez are proposing a five-year phase-out of the tax
on profits in favor of a higher gross-receipts tax to keep revenues stable.
Both argue that such a system would remove the disincentive to locate a
business in the city and spread the tax burden over more businesses.
"We believe we're going to create more jobs and send a message to the world
that Philadelphia is open for business," said Green.
To protect smaller businesses and startups, the Council members want to
exempt the first $100,000 of sales from any taxes. And, to protect grocery
stores, they plan to provide an exemption for those selling fresh food.
"If people are looking to start up businesses, we want to provide people
with an incentive," Quinones-Sanchez said.
Mayor Nutter, who has long been a champion of reducing the gross-receipts
tax, said he still needed to see more research on how the change would
affect businesses.
"Certainly it is a creative idea, but it is a different way of looking at
tax policy," Nutter said. "We need to know about the impact."
What does business think?
In the business community, the pitch so far has met with mixed reactions.
Danilo Burgos, president of the Dominican Grocers Association, said he
thinks the $100,000 exemption would benefit many of his more than 300 members.
"The small businesses - in our case, mom-and-pop businesses - those types
of businesses are the ones that are going to benefit the most," Burgos said.
"A lot of businesses in the first couple years, it's hard to break that
$100,000."
And Ned Rauch-Mannino, director of policy and programs at the Urban
Industry Initiative, a city-sponsored agency that supports manufacturers, said
the
proposal could aid manufacturing companies that sell goods outside the
city, because outside sales aren't subject to the gross-receipts tax.
"Going forward, this bill could be a great advantage to any company doing
the great majority of their business outside Philadelphia, bringing profits
back to Philadelphia," said Rauch-Mannino. "Every one of the companies I
have met with sees a significant increase [in profit] from the change."
But Rob Wonderling, president of the Greater Philadelphia Chamber of
Commerce, stressed that there will be winners and losers under the plan.
"Clearly, it is a tax shift, not a tax cut. The result of that oftentimes,
particularly in a recession, is it may have unintended consequences," said
Wonderling, noting that car dealers or hotels may fare poorly.
Ed Grose, executive director of the chamber of commerce, said his members
would need to run the numbers to see how they would fare. He also noted that
the business tax isn't the only issue weighed by companies considering
Philadelphia as a base.
"The Philadelphia hotel industry agrees with Council that Philadelphia
needs to become more business-friendly to attract more corporations," Grose
said. "However, just changing the business-privilege tax alone won't make
Philadelphia more business-friendly. There are other taxes that are part of
the
equation."
Green agreed that there are other taxes confronting businesses, but noted
that the wage tax is already being decreased.
"All those levers we can continue to move," Green said. "We're focused on
all of them, but we're doing this first."
Comcast executive David L. Cohen, who serves as board chairman of the
chamber of commerce, questioned the plan, noting that the city used to have a
higher gross-receipts tax.
"There is a general perception around fairness that taxing profits is more
fair than taxing revenues and receipts. There's a logic to that," Cohen
said. "We used to have [a higher gross-receipts tax]. It was called the
mercantile tax. There was widespread unhappiness and dissatisfaction."
