UPDATED: Wagner expands plan

WAGNER BILL WOULD ELIMINATE PITTSBURGH BUSINESS TAXES

“Current system hurts region’s families”

HARRISBURG (Dec. 10, 2003) –  State Senator Jack Wagner (D-Allegheny) today introduced legislation that would eliminate the Business Privilege Tax (BPT) and Mercantile Tax (MT) currently imposed by the city of Pittsburgh.

“If we are ever to reverse Pittsburgh’s downward economic slide, we must help businesses create family-sustaining jobs in the city,” said Wagner. “Let’s start by getting rid of these two unfair, inequitable, and onerous business taxes.”

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. 

However, almost half of city businesses are exempt from paying business taxes, including most of the city’s largest employers.  As a result, small businesses bear a disproportionate share of the tax burden.  The taxes also discourage new businesses from moving into the city.

Wagner explained that the current system ultimately hurts families in the region.  “Our fates are linked, whether we like it or not.  Less businesses means less jobs and, due to less revenue coming into the city, the potential for higher taxes on individuals.”

Wagner’s bill would authorize Pittsburgh City Council to eliminate the BPT and MT.  To replace the revenues currently generated each year by the two taxes, council would 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. 

The legislation would cap the rate of the new tax at 0.75%, but the actual rate set by council could be significantly lower.  “A rate of only 0.625% would generate enough revenue to completely replace the $50 million raised under the current system,” Wagner said.  At the maximum rate, the PET would provide an additional $10 million annually for the city.

Wagner presented several 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, Wagner emphasized that they would pay less than if the current system were simply left in place and the exemptions eliminated.

The bill will be formally introduced in the State Senate next week.  Wagner urged the General Assembly and Governor Rendell to act swiftly in enacting his bill into law so that city leaders can then adopt the new system.  “Together, we can demonstrate that Pittsburgh is ‘open for business,’” Wagner said.

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