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January 24, 2006
TO THE PRESIDENT AND MEMBERS OF
THE CITY COUNCIL OF PHILADELPHIA:
I am returning herewith as disapproved Bill No. 050669, passed by the Council on December xxx 2005. This Bill would impose annual rate reductions to the net income portion of the business privilege tax (BPT), as well more aggressive reductions in the gross receipts portion than assumed in the FY06-FY10 Plan through tax year 2010. In addition to setting the tax rates through 2010, the Bill would also enact much faster reductions to both portions of the BPT after tax year 2010, subject to Council ordinance, with elimination of the BPT by tax year 2017.
First, I am returning this Bill to you on the day that I submit the proposed FY 07 opearting budget and proposed FY07-FY11 Five-Year Plan. Tax measures should be considered as part of this budget and financial planning process, alongside departmental budgets and decisions about our services, investments and infrastructure. Our testimony on this Bill was delivered prior to the annual process of estimating our revenues, re-assessing each department’s needs and capabilities, and etermining our executive priorities. Now that we have completed this internal process, we begin the phase of working with City Council to arrive at mutual priorities. This annual context is the ideal time to consider tax measures.
Second, I support year-by-year tax rate reductions, as implemented successfully for the first seven years of our tax reduction program. Year-to-year rate setting allows the Mayor and City Council the flexibility to adapt to constantly changing fiscal circumstances. We plan for modest recurring tax reductions. During my tenure in office we have reduced taxes by more than $1.1 billion. Some years we are in a position to do more. Theere may be years when the City should do less. Year to year consideration affords the City this management flexibility.
The Administration testified that it could not support the provisions of this bill locking in tax rates for five years. We also testified that we cold not support setting into a law a schedule of tax rates that would accelerate rapidly after the Plan period, even if that schedule required a separate ordinance. The next Mayor and City Council have already had their revenue options sharply curtailed by massive wage tax rate reductions and low-income wae tax credits setting in beginning in FY 09. I do not support placing a further unreasonable burden and expectation on the next generation’s ability to govern.
Respectfully submitted,
John F. Street
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