Here’s how Philly’s property tax system compares with other cities

Philadelphia’s latest property reassessment represents “a key moment” for Philadelphia, according to a new report from Pew Charitable Trusts, with the city’s total combined property value rising to $204 billion, up from $168 billion just three years ago.

The report comes amid controversy over the first citywide reassessment in three years — and property owners’ frustration over resulting tax hikes. Public opinion of the city’s property tax remains low, with residents scoring it in a Pew poll as one of the most unfair levies. Among large cities in the country, Philadelphia has one of the highest home-ownership rates — both generally and among low-income homeowners in particular.

» READ MORE: Philly property assessments are systemically inaccurate in Black and low-income neighborhoods

Pew Charitable Trusts, a nonprofit and nonpartisan policy think tank that conducts research on issues in Philadelphia, released the report Thursday. Here are six key takeaways:

Despite ongoing problems with the city’s property tax system, revenue is booming.

Annual revenues collected from property taxes have skyrocketed from just over $1 billion in 2010 to more than $1.6 billion in 2021, a period in which the city implemented four rate increases and multiple reassessments that led to higher tax bills for many property owners.

Property tax revenue is almost equally split between the city and the School District of Philadelphia. But overall, Philadelphia is much less reliant on property taxes to fund its operations than Boston, New York, Washington, Chicago, Detroit, Houston, Columbus, Baltimore, Atlanta, or Pittsburgh.

For the last decade, property taxes have steadily contributed about 15% of Philadelphia’s general fund, which finances most government functions. By contrast, in 2020, seven other cities were more reliant than Philadelphia on real estate taxes to fund similar services, including Pittsburgh at 27.1%.

Instead, Philadelphia looks to its wage tax to fund city government. Taxes on wages, earnings, and net profits made up 43% of the general fund in 2021.

Cities tend to lean heavily on property tax because it is a more reliable source of income, particularly during the pandemic, when wage taxes were more unpredictable, the Pew report said. Cities that derive more revenue from property taxes can therefore be more economically resilient.

Despite paying relatively low real-estate taxes, Philadelphians shoulder a relatively high household tax burden when compared with peer cities, researchers found. That’s because Philadelphia levies taxes that other jurisdictions don’t use or establish at much lower rates — such as the oft-criticized wage tax.

Citing research by a Washington analyst, the report states that for a family earning about $50,000 in 2019, only three peer cities — Baltimore, Chicago, and Detroit — would tax a higher share of their income than Philadelphia would. (Pittsburgh was excluded from that analysis because it studied only the largest cities in each state.)

» READ MORE: Philly officials touted tax relief efforts. But some homeowners stand to lose money.

More than two-thirds of Philadelphia’s land parcels are residential properties, similar to Chicago and to Columbus, Ohio.

And more than two-thirds of Philadelphia’s property taxes come from residential properties. In Chicago and Columbus, residential properties constitute 51% and 61% of overall property revenue, respectively.

» READ MORE: ‘It’s wrong’: Philly property assessments double in some working-class neighborhoods

Why the difference? Philadelphia is bound by the Pennsylvania Constitution’s uniformity clause, which mandates that all properties — residential or commercial — be taxed at the same rate. In Philadelphia’s case, that number is 1.3998%.

By contrast, Chicago, Boston, and Washington set a lower tax rate for residential properties than all other types of properties. That’s also true for “single-family homes and small apartments” in Columbus and New York.

Besides Philadelphia and Columbus, only Atlanta and Baltimore see residential properties generate more than half of the city’s property tax revenue.

Rather than changing the tax rate depending on the type of property, the city runs a number of exemption programs to reduce some property owners’ tax burdens.

As of the last fiscal year, 32% of properties in Philadelphia were exempt from taxation. Most of the untaxed parcels are government buildings, churches, public spaces, nonprofit hospitals, and other nonprofit civic institutions.

But tax relief programs — like the popular homestead exemption and the controversial 10-year tax abatement — also contribute to the $54.5 billion value of untaxed property, Pew said.

More than 260,000 properties are enrolled in tax relief programs citywide. Of those, the abatement accounted for nearly half of the exemptions, while residential relief programs like the homestead exemption or the senior tax freeze accounted for the other half.

All Philadelphia homeowners can receive the homestead exemption for their primary residence, making it the most popular of the city’s tax relief options. This reduces the taxable portion of owner-occupied properties by a fixed amount — which has grown from $30,000 in 2014 to $80,000 for tax year 2023.

Pew found that the newly raised homestead exemption most benefited people living in low-value homes, in some cases reducing their tax rate by 75% or more.

Philadelphia’s average property tax bills were the second lowest among peer cities surveyed by Pew — and that owes partly to the city’s “comparatively generous” homestead exemption, which amounted to $45,000 at the time of the study.