April 28-May 4, 2005

slant

Taxed Out

Does the City of Philadelphia need, like, all of my money?

I remember the day I got my first check from City Paper. It was for a freelance story I wrote about four blind folks who sing a cappella in Suburban Station, and it was the first time I had ever been paid for writing something. I pulled the check out of the envelope and thought to myself, “Today, I am a Professional Journalist.” I considered kissing it.

Imagine my surprise when I learned that the check was only visiting me on its way to its actual legal owner: the City of Philadelphia.

You see, the moment I accepted this unsalaried compensation for my services, I became, in the eyes of the city, a “business.” And as a “business,” I was responsible for paying the Business Privilege Tax, a 6.5 percent levy on profits, plus .21 percent on all transactions, regardless of gain or loss.

When I discovered this I was disappointed, but thought, OK, fine. City taxes pay for good programs and a lot of salaries, as well as some services I would like to have available to me should the need arise. So I went and got the paperwork. But it turned out that before I paid the BPT, I had to register my “business” by paying a one-time licensing fee of $250. Then, after I paid it, I had to pay a “mandatory estimate” for next year — meaning I had to pay the tax twice.

Now, I made a total of $950 freelancing before I got hired on full time — I couldn’t possibly owe the city $250 on that, right? I called the Department of Revenue and asked if there wasn’t some minimum amount that a “business” has to make before being charged this fee.

Nope, I was told. If you received a 1099 form for any sort of unsalaried work, you’re responsible for the BPT.

Wait a minute. What if I had made $25 freelancing? Would I still be responsible for the $250?

The department representative proceeded to warn me that if I failed to pay the tax, the city would find out, and then find me.

So she didn’t really answer my question. The answer, in any case, is yes: if you make $25 on the books in Philadelphia, the city expects $250 — plus the $3.36 you’d owe on the $25. In fact, if a business loses money, Philly still expects the $250. And then they have the stones to go ahead and call doing business here a “privilege.”

In the end, my business (which is tentatively called “The Business Privilege Tax Payment Co.”) turned over $378 of its $950 to the city, before state and federal taxes. Look, I’m not against taxes, and I don’t usually complain about paying them. But the BPT regulations take a tax intended for businesses (a complicated proposition, with pros and cons) and stick it to young artists, odd-jobs doers, conscientious baby-sitters and, technically, lemonade stands. The tax also famously sucks the life out of young small businesses, which may not make money in their first couple of years.

Not only is the BPT disproportionate and its target absurd, but there’s documented evidence that it drives businesses from the city. My guess is that the most common effect of the tax is to discourage people from paying their taxes. People who, unlike me, aren’t suckers, might be willing to fork over a more reasonable amount, but look at that tax and say, oh, hell no. Others probably just figure the tax can’t possibly apply to them. In fact, I bet there’s someone reading this right now who’s discovering for the first time that he’s a scofflaw. (Hello, scofflaw! Your late fees are accumulating.)

The question becomes: Whom to blame? Certainly not the Department of Revenue representative, who was reading from a script. And the majority of members of City Council agree that the BPT must be repealed. They’ve been stymied, however, by Mayor Street, who wants to repeal only part of the tax. So there’s one villain. But the mayor didn’t write the thing. It’s a holdover from the ’50s, when the city fathers ran an inept and corrupt bureaucracy. Ahem.

The other person I could blame is myself. A few weeks ago, I sat in on a City Council hearing about the BPT, but decided not to do a story about it. It seemed like an awfully complex subject that would require a lot of work, and that no one would want to read about. Now look at me. We reap what we sow, I guess. I reaped a bad tax day. Philadelphia’s going to reap something worse.

Doron Taussig is a City Paper staff writer and was probably beaten up for his lunch money in grade school. If you would like to respond to this Slant or have one of your own (750 words), contact Duane Swierczynski, editor in chief, City Paper, 123 Chestnut St., third floor, Phila., PA 19106 or e-mail Duane Swierczynski.


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