Philadelphia’s business tax problem is a jobs problem

Philadelphia has long been a city of hardworking people. Yet, for too many, hard work does not translate into economic security. That is because our tax system actively discourages the kinds of businesses that create family-sustaining jobs. The work of the Philadelphia Tax Reform Commission makes one thing abundantly clear: Our tax structure is not just outdated — it is holding our city back.

One of the most common misconceptions about business tax reform is that it is a giveaway to large corporations and billionaires. But let’s set the record straight: Philadelphia has few large corporations, largely because our tax structure drives them away. Of the top 15 employers in Philadelphia, only three are for-profit corporations. And billionaires? They are practically nonexistent here. Instead, the city’s largest employers are tax-exempt institutions — hospitals, universities, and government agencies. While these entities provide essential services and many jobs, they are not engines of private-sector growth. They alone cannot generate the economic dynamism Philadelphia needs.

The reality is that most new jobs in Philadelphia are in health care, leisure, and hospitality — sectors that, while vital, tend to offer lower wages and limited upward mobility. These industries employ tens of thousands of Philadelphians, but they are not building a strong middle class. Instead, they reflect a local economy dependent on foot traffic, tourism, and consumer spending rather than on industries that create high-paying jobs in technology, life sciences, or advanced manufacturing.

The problem is simple: Businesses that do not rely on in-person interactions have little incentive to locate in Philadelphia. Compared with peer cities like Boston and Washington, D.C., Philadelphia’s tax structure is uniquely punitive, making it far more attractive for companies to move to the suburbs or to states with friendlier tax policies. Over time, this has drained the city of the very companies that create sustainable economic mobility.

The urgency for reform is great.

At the center of this issue is the Business Income and Receipts Tax (BIRT) — an unusual tax that penalizes businesses for existing, regardless of profitability. Unlike most cities, Philadelphia taxes businesses not just on profits but on gross receipts, meaning companies owe taxes whether they make money or not. This creates a significant burden on entrepreneurs, start-ups, and small businesses, making it harder for them to reinvest, expand, or hire more workers. Companies that do not depend on foot traffic can avoid these costs by locating just outside city limits — taking good jobs with them.

The urgency for reform is great. The existing $100,000 BIRT exemption may soon go away. Currently, businesses with less than $100,000 in revenue do not have to file the BIRT, and those that generate more pay taxes only on the increment.

Due to a court challenge, Mayor Cherelle L. Parker’s administration has proposed eliminating the exemption, which is estimated to impact more than 120,000 businesses, many of which are already struggling under the weight of Philadelphia’s tax structure. For these businesses, the elimination of this exemption is not just a policy change — it is a direct hit to their bottom line. This is happening at a precarious time, just as federal tariffs and other policies have added uncertainty to the economy. If we do not take bold action now, we risk forcing even more entrepreneurs to downsize, relocate, or shut their doors entirely.

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Another overlooked reality is that a strong small-business sector depends on a robust corporate presence. Large companies provide contracts, partnerships, and steady customers that small businesses rely on to grow. Whether it is a cleaning service hired by an office building, a local caterer providing meals for corporate events, or a tech start-up securing a contract with a major firm, small businesses flourish when they have access to stable, well-funded corporate clients.

Consider the impact on a commercial printing company that relies on corporate clients for bulk orders of marketing materials. If major firms relocate to the suburbs or another state, that small business loses a critical revenue stream. This cycle erodes the economic foundation of our city.

The Tax Reform Commission’s recommendations are not about giving corporations a handout. Taken together, they are a balanced approach that would make Philadelphia a place where businesses of all sizes — especially those that create good jobs — can grow and thrive. The proposed changes, which include eliminating the BIRT tax burden, modifying the Net Profits Tax, and meaningfully reducing the wage tax, represent a bold but responsible approach to tax policy. These reforms would finally align Philadelphia’s tax structure with cities that are successfully attracting businesses, increasing employment, and fostering economic growth.

» READ MORE: Philadelphia’s working poor should not pay a regressive city wage tax | Opinion

Critics of tax reform often argue lowering business taxes will hurt the city’s ability to fund essential services, especially given the potential reductions in federal funding. But the bigger risk is maintaining a stagnant economy that continues to push businesses — and their tax dollars — elsewhere. When companies leave or fail to start here, we lose revenue, job opportunities, and economic stability. A stronger business climate means more jobs, higher wages, and a larger tax base to support the services Philadelphians rely on.

If we want to break the cycle of poverty and create true economic opportunities, we need to stop pushing away the very businesses that create middle-class jobs. This should not be framed as a battle between businesses and residents. Instead, we must recognize that a thriving business sector is essential to lifting more Philadelphians into financial security.

We are at a critical juncture. The potential elimination of the BIRT exemption places new pressures on small businesses, making immediate tax reform not just a goal but an urgent necessity. The time to act is now.

Jennifer Rodríguez is the president and CEO of the Greater Philadelphia Hispanic Chamber of Commerce.