The Pennsylvania House yesterday passed a bill that would allow Philadelphia to raise its sales tax another percentage point and to defer it pension payments for city employees further into the future (HT GrassrootsPA).
Unfortunately, these are both poor policies. Philadelphia’s budget crisis is the result years of reckless spending and tax hikes by Philadelphia’s elected officials.
Philadelphia already has the highest sales tax in the state, and an increase to 8% will give the city a rate one-third higher than the rest of the state. This rate increase will make Philadelphia less competitive than its suburban neighbors, in Pennsylvania, as well as in bordering New Jersey and Delaware (the latter which has no sales tax).
Philadelphia already has the 2nd highest local tax burden among U.S. cities, and is one of only six large cities with a wage tax. Thus it is not surprising that Philadelphia has continued to lose jobs and residents.
And Mayor Nutter’s proposal to suspend payments to the city’s pension plan is no solution at all. Instead of reforming the city’s bloated and unaffordable pension system, the mayor would just pass that cost on (with interest) to future generations of taxpayers.