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WAGNER URGES CITY OVERSIGHT BOARD TO ELIMINATE BUSINESS
TAXES
Presents three options to create jobs,
provide new revenues
Related Reading:
Pittsburgh Post-Gazette story
HARRISBURG (March 23, 2004) - State Senator Jack Wagner
(D-Allegheny) has urged Pittsburgh's fiscal oversight board to consider
his new legislation to eliminate the Business Privilege Tax (BPT) and
Mercantile Tax (MT) currently imposed by the city.
In letters to the five members of the oversight board, Wagner wrote, "I
hope that you will consider my legislation to restructure Pittsburgh's
business tax system to improve the city's economic competitiveness,
create jobs, and provide additional revenues to the city."
The oversight board, created last month by Act 11, is drafting a
preliminary report of its recommendations for restoring fiscal stability
to Pittsburgh. The report is due to Gov. Rendell and the General
Assembly by April 12, 2004.
The board will hold a public meeting at 3:00 p.m. tomorrow in the Heinz
57 Center to discuss city finance issues.
The city currently taxes the gross receipts of businesses through the
BPT and MT - service, trade, and professional businesses pay six mills
on their gross receipts, excluding the first $20,000; retail vendors,
restaurants, and places of amusement pay two mills; and wholesale
dealers of goods pay one mill.
Wagner emphasized that almost half of city businesses are exempt from
paying business taxes, including most of the city's largest employers.
As a result, he told the oversight board, small businesses bear a
disproportionate share of the tax burden and new businesses are
discouraged from moving into the city.
Wagner's new legislation,
Senate Bill 1051, would authorize Pittsburgh
City Council to reform the city's business tax system through one of
three options.
Under Option 1, council could completely eliminate the BPT and MT and
impose a new Payroll Expense Tax (PET) on the payroll of for-profit
employers and on the distribution of net income from self-employed
individuals, members of partnerships, associations, joint ventures, and
other entities who perform work or provide services within the city.
This option was originally introduced by Wagner as
Senate Bill 991 last December.
"The legislation would cap the rate of the new tax at 0.75%, but the
actual rate set by council could be significantly lower," explained
Wagner. A rate of only 0.625% would generate enough revenue to
completely replace the $50 million raised under the current system. At
the maximum rate of 0.75%, the PET would provide an additional $10
million annually for the city.
Under the new Option 2, council could phase-in the original plan over
three years by eliminating the MT immediately, reducing the BPT by 2
mills each year until it is also eliminated, and increasing the PET by
0.15% each year until it is set at 0.75%. This option would provide new
revenues to the city ranging from over $14 million in the first year to
over $10 million in the third and subsequent years.
Under the new Option 3, council could cut the BPT in half, eliminate the
MT, and impose a 0.50% PET. Option 3 would provide over $11 million
annually in new revenues to the city.
"This option may be the most agreeable to the business community," said
Wagner, "because it imposes the lowest-rate PET while cutting or
eliminating the current business taxes and retaining the exemptions."
Wagner presented the oversight board with examples demonstrating that
his plan would provide tax breaks to businesses of all types and sizes.
Although businesses that currently pay little or no business taxes
would, for the first time, pay their fair share for city services, they
would pay less than if the current system were simply left in place and
the exemptions eliminated.
According to Wagner, his plan would have several additional benefits.
"By simplifying the payment and processing of taxes, this plan would
reduce administrative costs for taxpayers and the city," he wrote.
"Perhaps most importantly, it would spur the creation of
family-sustaining jobs in the city and keep taxes on individuals lower."
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