Should Philadelphia have a wealth tax? | Pro/Con

Last week, Councilmember Kendra Brooks introduced a bill to reinstate a tax on something known as “intangible wealth” — mostly stocks and bonds.

The 0.4% tax on the value of these assets could raise $200 million for the city. So far, it’s raised a lot of different opinions.

Councilmember Brooks says most of the income from the so-called wealth tax would come from the top 5% richest Philadelphians. But critics say it could have negative consequences for nonwealthy residents, including small-business owners and retired people living partly off of their investments.

We asked two retired Philadelphians to weigh in: Should Philadelphia have a wealth tax?

By Joseph Kolakowski

I graduated college in 1981. I managed to work jobs that paid for my college education in full. Did not receive a single cent in student aid. Had no student loans. Survived a severe recession. Landed a good first job. I was very fortunate.

I started thinking about my future. I learned the value of money and savings from my parents, who survived the Great Depression. I decided to start an individual retirement account (IRA). The annual contribution limit then was $2,000. I thought $2,000 a year was not enough to save for my future.

I was wise with my money. I saved it. I read about finance and learned that investing in stocks provided returns that would beat inflation over time. I started buying mutual funds outside my tax-sheltered IRA to build greater future savings. Then, in 1984, came a notice from the School District of Philadelphia, wanting to tax the value of my mutual fund shares. This is absurd, I thought. I already paid taxes on this money, saved it, and now I will be taxed again?

“Taxing residents isn’t the best way to solve our problems.”

Philadelphia is the poorest big city in the nation for a good reason. Philadelphia taxes too much and provides too little in return to incentivize people and businesses to stay. The latest wealth tax proposal by Councilmember Kendra Brooks will unleash a host of negative consequences that will severely impact Philadelphia’s dwindling middle class and its small-business owners, who are still digging out from the pandemic.

Proponents of the wealth tax proposal argue that it will only tax “intangible wealth,” such as stocks and bonds, and not pensions or retirement accounts. So by that logic, they say, the tax will affect only the wealthiest of Philadelphians and spare the average Joe, including seniors and other people saving for their retirement. But they are wrong.

In recent years, many companies have phased out pensions or provided little to no matching on retirement funds. There is also now increasing uncertainty about future Social Security payments and Medicare benefits for retirees. So to save for their old age, many Philadelphians — not just the wealthy few — have been investing in stocks and bonds.

» READ MORE: A wealth tax doesn’t make sense in Philadelphia | Opinion

Other working- and middle-class people have invested in the stock market simply for the higher rates of returns, which helps them keep pace with rising inflation and its erosive effect on purchasing power. All of this would be vulnerable to this so-called “wealth tax.”

Councilmember Brooks has stated that further tax increases won’t prompt people to leave the city. She is totally wrong. In 1939, Philadelphia became the first municipality in the United States to impose a wage tax. In 1940, the wage tax rate was 1.5% and the city population was 1,931,334. Fast forward to 1990, the city’s wage tax rate was 4.96% and its population was 1,585,577. Businesses voted with their capital, people voted with their feet, and the city was essentially bankrupt by 1990. (And when the city began to lower the wage tax from 4.96% to the 3.88% rate it is today, the population of Philadelphia increased from 1,517,550 in 2000 to 1,603,797 in the 2020 Census.)

Clearly, taxing residents isn’t the best way to solve our problems.

Philadelphia has a future only if it chooses to become a clean, safe, and economically viable place that can attract people to live and businesses to set up shop. This requires programs and policies that encourage development and growth and not regressive taxation that will drive people and businesses out.

Joseph Kolakowski, now retired, spent 30 years working with employee benefits and payroll, including counseling employees on how to save for their retirement. He lives in Somerton.

By Karen Harvey

The COVID-19 pandemic has made Philadelphia’s historically severe racial and economic inequality in areas of wealth, housing, and education glaringly obvious. Those most impacted by these inequalities have been people of color, and Black people specifically — who have faced hundreds of years of economic disenfranchisement, including the history of redlining, a woefully low minimum wage, and unjustly funded public schools. And, of course, a racial wealth gap, which persists to this day.

Throughout the pandemic, predominantly white billionaires and the ultrarich increased their wealth by over 60%. Comcast CEO Brian Roberts made over 15% more during the first year of the pandemic, as working people required the internet for work, school, and social connection.

» READ MORE: A Philly wealth tax could raise more than $200 million, sponsors say. But critics call it a disaster.

For decades, Black and brown communities in Philadelphia have been told there are no resources. We’ve felt this when street sweeping was cut in the 2000s, when libraries and recreation centers rolled back their hours, when parents were required to send their children to school with their own toilet paper. Our city’s schools, infrastructure, public services, and job opportunities have failed our young people — and it’s no surprise that when our young people don’t have hope, we see a spike in violence.

Over the course of decades, elected officials in City Hall gave away millions of dollars in tax breaks to greedy megacorporations, the ultrarich, and developers in the form of cuts to the business tax, the 10-year tax abatement, and more “trickle-down” development approaches. These only brought budget deficits and cuts to services in working-class neighborhoods. It is clear that when megacorporations and the ultrarich don’t pay what they owe to our city, it is Black and brown communities that bear the cost.

“When megacorporations and the ultrarich don’t pay what they owe to our city, it is Black and Brown communities that bear the cost.”

The Philadelphia wealth tax, introduced by Councilmember Kendra Brooks and cosponsored by Councilmembers Jamie Gauthier and Helen Gym, would begin the process of closing the racial wealth gap in Philadelphia and addressing the income inequality that the pandemic has only increased. After decades of the same development approach that gave tax giveaways to corporations, the wealth tax could begin a new chapter in Philly’s history — one where we demand those with the most pay what they owe.

A Philadelphia wealth tax could bring in over $200 million per year by taxing the value of direct holdings in stocks and bonds (and exempting pensions, retirement, and savings accounts). By targeting the wealth held mainly by the top 5% of Philadelphians, our elected officials can take action now to ensure those who have it contribute what they owe to fully fund city services.

These funds could go directly toward neighborhood services like adequate programming for people experiencing homelessness, more affordable and accessible housing, and making sure that seniors like me can afford the costs of property taxes as rates go up. It could go toward ensuring seven-day-a-week libraries, recreation centers, expanded summer programs, clean streets, and city employment opportunities so that we’re investing fully in our young people.

As we recover from the pandemic, the choice is clear: We can invest in a fully-funded Philadelphia — where housing is a human right and our young people have the support they need to thrive — or we can continue to give tax giveaways to a handful of the richest people and return to underfunded neighborhoods. After the past two years, on top of decades of systemic disinvestment and structural racism, I know it’s past time that we return hope to Black and brown neighborhoods by investing in our communities and passing a wealth tax.

Karen Harvey lives in West Philadelphia. She retired from full-time work in 2008 and is now a lead organizer with TURN and the campaign director of the Philly Rent Control Coalition.