03/08/2013 - Since the beginning of the new century, Philadelphia's residential tax burden, measured as a percentage of income, has been falling while taxes have risen in many suburbs in Pennsylvania and New Jersey, reversing a long-term trend and making the city more competitive with its neighboring communities.
The finding by Pew's Philadelphia research initiative came in a report, Residential Taxes: A Narrowing Gap Between Philadelphia and Its Suburbs, which analyzed 237 municipalities in the Philadelphia region. The study found that the tax disadvantage of living in Philadelphia versus the suburbs declined markedly from 2000 to 2012 and in some instances disappeared. In 2000, Philadelphia imposed the region's third-highest tax burden on its residents compared with the taxes imposed on non-commuters in the suburbs. By 2012, the city had the 48th-heaviest burden.
One reason was that Philadelphia lowered its wage tax while many Pennsylvania suburbs raised theirs, the study determined. Another major factor was the city's failure to raise property assessments to keep up with market values over the 12 years that were studied.
Philadelphia is now preparing to tackle that issue, and the research initiative has developed a second report that examines the challenges the city faces in that area. Officials propose to change the certified market value of every piece of property, the way assessments are used to calculate tax bills, and property owners' options for dealing with any big tax increases that might result. The study, The Actual Value Initiative: Overhauling Property Taxes in Philadelphia, determined that no large American city in recent years has attempted to do all three things at once.
"The changes to the city's property tax system will be a significant transition, and for some, a painful one," said Larry Eichel, who directs the project. "The report looks at the challenges and experiences of other cities for the benefit of policymakers, who will need to determine how much can be done to alleviate the impact on the thousands of Philadelphia residents who will be looking at significant increases in their tax bills."
The reports and an interactive graphic can be found at pewtrusts.org/philaresearch.