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What's this all about?
The BPT consists of two components – a 6.45% tax on net income and a 0.1415% tax on gross receipts. The net income tax is paid primarily by Philadelphia-based businesses, whereas the gross receipts tax is paid by all businesses that make sales in Philadelphia. As a result, there is a disincentive for profitable businesses to headquarter within the city limits, since they can avoid paying the net income tax simply by moving across City Line Avenue.
The proposal would spread the tax burden over a much wider base (all sales in the city by all firms, wherever located) at a very low rate (0.53% of sales), unlike the current tax which applies a very high tax rate (6.45% of net income) on a small base (Philly-based companies). Having a broad-base/low-rate tax structure is a consistent with widely-accepted tax policy.
The shift to gross receipts also will simplify the city’s overly complex business tax structure, eliminate most of the loopholes currently used to minimize BPT liability, and result in a more steady and predictable revenue stream for the City.
Most importantly, unlike the existing system, this tax reform will promote economic growth and job creation in the City of Philadelphia. More companies will want to locate in the city and employ Philadelphians, thereby increasing economic activity and prosperity throughout the city.