Tax cuts in Parker’s budget proposal are welcome, but challenges remain | Editorial

Mayor Cherelle L. Parker’s budget has some welcome proposals when it comes to reducing taxes that have long hurt the city. But questions and concerns remain around her plan to spend $800 million on housing initiatives, as well as the fallout from the Trump administration’s assault on federal spending.

After dodging efforts to address the city’s exorbitant tax burden last year, Parker’s proposed $6.7 billion budget calls for reducing the much-maligned Business Income and Receipts Tax, or BIRT, over the next 13 years.

Over time, Parker’s plan would cut the tax rate on business profits in half, and eliminate the gross receipts tax by 2039. The cuts will cost the city $9.2 million a year — not a big loss in a budget of nearly $7 billion.

While more aggressive cuts would be nice, the city is at least finally moving in the right direction — provided it sticks with the plan. The tax cuts should boost confidence in the business community and lead to more job creation.

The same goes for reducing the highest-in-the-nation wage tax, which Parker proposed lowering from 3.75% for city residents to 3.70% in fiscal year 2025, before eventually falling to 3.39% by 2030.

Efforts to reduce the wage tax began under then-Mayor Ed Rendell in the 1990s and were instrumental in the city’s revival. But the cuts have been too small and too slow in coming. Even worse, they were stopped during different financial crises under Mayors Michael Nutter and Jim Kenney.

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Study after study has shown how the city’s onerous tax burden — especially the wage tax — has been a job killer.

Parker’s plan puts the city back on the right track toward being competitive at a time when remote work has made it easier for many workers to relocate to more affordable areas.

But a big question hanging over Parker’s budget plan is how the Trump administration’s reckless and irresponsible cuts to state and local funding will impact the city’s finances. Not to mention whether Trump’s tariffs and other federal layoffs and funding cuts will lead to a recession.

Parker’s other bold plan calls for borrowing $800 million to invest in bolstering the city’s existing housing stock and funding new construction of more affordable housing. This is key to Parker’s campaign promise to add 30,000 homes in the city.

As with any big new spending initiative, there is concern this could turn into a costly boondoggle that largely benefits connected cronies. After all, City Hall has a richly deserved reputation for corruption and half-baked financial plans. (See: DROP and borrowing to fund the pension plan.)

That is why Parker’s housing plan needs safeguards and oversight to ensure the funds go to proven and effective programs that provide a real return on the sizable investment of taxpayer money.

Parker plans to provide more details about her proposal early next week. Much of her success and legacy is riding on the housing initiative, which is all the more reason why it must be done right.

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As usual, a large portion of the city’s budget is slated to fund the police. The $872 million for the police department is in line with last year’s allocation, and wisely includes expanded funding for crime-fighting technology and officer recruitment.

A new police forensics lab will help solve crimes, while increased recruitment efforts should address chronic staffing shortages. But hiring quality officers is more important than quantity, so lowering standards is not a smart solution.

Parker and Police Commissioner Kevin J. Bethel deserve credit for the steep drop in homicides and shootings last year. However, crime rates across the country have dropped back to pre-pandemic levels. While it’s unclear how much Philadelphia’s crime-fighting strategies made a difference, there has been welcome leadership and attention on public safety.

But to make a lasting impact, the mayor should use the upcoming labor negotiations to push for real reform in a police department that has long been plagued by inefficient use of officers, costly misconduct, exorbitant overtime spending, and a need to train officers in de-escalation tactics.

Dramatic improvements in the city’s pension fund — thanks mainly to the Kenney administration — are helping to provide budget flexibility. The pension fund is expected to be fully funded by 2033, which will free up $433 million in annual debt service payments that can be spent on city services and lowering taxes.

If executed properly, Parker’s plan to reduce crime, lower taxes, and increase affordable housing could set up the city for success.