Lets Make the Best Deal on Tax Reform

Philadelphia Councilperson Joan Krajewski had a letter published in yesterday's Daily News calling for a new approach to collecting back taxes. She argues that

We need to make a deal with the people who owe the city $1.2 billion in back taxes by allowing them to come on down and pay their debt in exchange of waiving the interest and penalty during an amnesty program.

If we don't, who knows what is behind the curtain or trap door? It could be even more cuts in more city services, it could be more job layoffs, it could be a city bankrupted wishing we shoulda, woulda, coulda "made a deal."

In making her case she suggests establishing a tax amnesty program as recently recommended by Controller Butkovitz. Although such an effort may help some taxpayers come clean and get current on their arrears, Council urgently needs to look beyond the ongoing symptoms of back taxes and deeper into the root causes that are causing otherwise honest people to fall in the cracks.

Councilperson Krajewski alludes to this, mentioning

The problem is property taxes and other city taxes in general such as the business privilege and wage tax and the overwhelming interest and penalties that comes when you fall behind.

but stops short of taking a position on the very taxing dilemma facing the city. An examination of the Department of Revenue's list of property tax delinquents show an overwhelming percentage are residential property owners struggling to remain in their homes.

The most obvious way Councilperson Krajewski could help her constituents would be to permanently reduce their tax burden. How? Our research has consistently shown that of all the areas of the city, District 6 would see the deepest reductions by adopting a land value tax. Under the original proposal, the average annual reduction for residential properties would be $195, and under our universal exemption plan, that average savings would grow to $604 per year (see the chart below). Imagine what that savings could do for the grandmother already deep in tax debt?

Will the Councilperson support such a reform? We urge her constituents to find out. And by shifting to a land value tax, properties that end up delinquent will be easier to handle than the city's other taxes. If the property owner lives in the property but cannot afford the payments, a lien can be applied that caps the payments and defers the balance until time of sale. For absentee property owners that refuse to pay, the city can seize the property after a set amount of time and put it back on the market after pocketing the outstanding amount due. People that owe taxes on almost anything else can skip town and avoid repayment unless the city turns to costly collections operations--which still won't guarantee high recovery rate.

Concerned citizens should urge Councilperson Krajewski to consider the land value tax and get her colleagues to get behind it, because when it comes to tax reform and tax fairness, it's the best deal in town.