Real Estate Tax Abatement: It Worked
In 1997, City Council passed a bill (thank you Councilman DiCicco) giving developers a 10-year real estate tax abatement when they converted buildings into apartments or condominiums. In 2000, another bill (thanks again Councilman DiCicco) provided a 10-year abatement to developers building new projects. All indications are that the breaks are facilitating an unprecedented construction boom and significantly impacting components of Philadelphia's economy; currently, the City has approximately 9,000 new residential units coming online in the near future. Based on the market value of conversion projects (as opposed to new construction), the City will eventually receive $3.5 million annually in taxes, about half of which will hit in 2009 (see article). Financial statistics don’t say as much as experiencing the vitality Center City in person; the restaurants, the street life, the retail, the throngs of people – it wasn’t like that in the late 1980s when I moved to Philadelphia. The conclusion about City governance to be drawn from all this? Think locally and act locally. The tax burden in this City is too high and complicated; policies that strategically mitigate this burden can do much to improve economic and social vitality. Of course, policies that provide universal tax relief and de-complication are beneficial as well, but that's another topic.
4 comments:
One wonders whether Philly can use the same approach to other problems. One pressing problem is surplus office space and the lack of employment growth. What would happen if City Council was to pass a bill that eliminated the Business Privilege Tax and halved the Corporate Tax rate over 10 years for any company that hired an added 50 full time workers to their payroll?
Any company that relocated to Philly would only pay half the corporate tax for 10 years. Any existing Philly-based company that added 50 full-time workers would also have their taxes cut in half.
If such a scheme is even half as successful as the real estate tax abatement, Philly would prosper.
Is there any evidence that reliably teases out the contribution to the building boom of the tax abatements versus the stimulus of low interest rates (which spurred just about everybody that I know to buy, driving the building market naturally)? Most of the country seems to be having a boom without abatements, so it could be a bit much to give those all the credit... ?
I agree 100% with the Business Privilege tax being eliminated.
If Street wasn't so stubborn about conceding a minor victory to Michael Nutter in this area, logic itself would have spurred him to make these cuts long ago.
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