Breaking the Levy

INSIDE OUT: Once the "consummate insider" as a policy wonk in the city controller's office, Brett Mandel says officials are tired of hearing him rail against the BPT.
Photo By: Michael T. Regan

As the budget deadline looms, one man is on a crusade to eliminate a hated tax.

by Doron Taussig

Brett Mandel really doesn't like the business privilege tax. On April 15 (Tax Day), he rented a truck with two 10-foot projection screens planning to drive around Philadelphia showing a documentary he made about the controversial issue. But with the sun shining brightly, people couldn't see the film. So Mandel sought out shady spots — under train tracks, beneath I-95 — and showed the video there. "We were like roaches," he says. But it is of the utmost importance to him that as many people as possible call their council representatives and express displeasure with the tax.

"They have to hear from you," says Mandel, the executive director of Philadelphia Forward, an organization committed to tax reform, "because, believe me, they're tired of hearing from me."

The BPT (the presumptuous name has been a gift to its opponents) is a levy charged to anyone doing business in the city of Philadelphia. It consists of three parts: a one-time $250 licensing fee to start a business, a 6.5 percent tax on total profits, and a 0.21 percent tax on all transactions, regardless of gain or loss (this last bit is especially controversial because it means that someone could lose money and still owe to the city 0.21 percent of any money that did come in).

For years, opponents have been arguing that the BPT stunts Philadelphia's growth. The debate may finally be coming to a head: Anti-BPT signs have popped up around the city over the last several months as City Council considers several proposals for reducing the tax. A decision should be made when the city passes its budget, which it is required to do by May 31.

The other day, Mandel outlined his quarrel with the BPT at the monthly Bella Vista United community meeting in the Palumbo Recreation Center on 10th Street. A jolly guy with a cool-dork attitude, Mandel engaged the crowd of mostly older residents with lines like, "I don't think the mob takes 6.5 percent for protection" — "I'm afraid not," one man muttered — as he explained that Philadelphia's politicians have been afraid to raise property taxes, "because then they get complaints from little old ladies." Instead, Mandel lamented, they've put an undue burden on business. Other municipalities don't impose this burden, so a lot of businesses move to other areas and very few opt to move here. Cutting the BPT is also not about "corporate welfare."

"The fat cats get the tax reform they want by walking into the mayor's office," he said, citing the 15-year tax abatement Comcast received from the state for its soon-to-take-over-the-skyline tower. The BPT affects small business owners, he argued, to whom 8.6 percent makes a big difference. Then, he showed his documentary, Community Voices Speak Out: Real People For Real Tax Reform. At slightly more than seven minutes long, it consists of clips of local entrepreneurs like Michael Pearson of Union Packaging insisting that the BPT makes doing business in Philadelphia economically irrational. In it, Pearson explains that he's a resident but that his business is 50 feet from the border. The words are underscored by mournful music.

"The issues are hard to explain," Mandel says, "but the film medium is compelling. You get to look in the faces of some of these folks and hear them explain what's wrong with the tax. If I mailed around a letter or put up a billboard, people wouldn't process it."

Mandel was not always a crusader. He began in 1996 as a policy wonk with the city controller's office and in 2003 was appointed to the Tax Reform Commission, a temporary independent panel mandated by ballot initiative and assigned to study Philadelphia's tax code. The TRC recommended a phase-out plan that would eliminate the BPT by 2014, but the recommendation did not have the force of law. So, Mandel formed Philadelphia Forward to lobby for reform.

"I was the consummate insider," he says. "I became an outsider by happenstance."

The debate on the BPT has shifted since Philadelphia Forward began its campaign. There are very few people who still dispute the fact that the tax hurts business, and the city Chamber of Commerce has been taking out ads calling for its repeal. But there are more than a few people who believe that cutting the tax isn't worth the service cuts and fiscal imbalance that could result.

"It's not that we have looked at the particulars of the business privilege tax and concluded that it's some great tax," says Stanley Shapiro, coordinator of One Philadelphia, an organization dedicated to the preservation of public services, "but we've already seen reductions in fire stations, police, libraries, recreation centers. These are the things cities need in order to remain vibrant and alive."

Mayor Street shares Shapiro's concerns. The last budget go-round, the council approved a bill to phase out the BPT by 2017, but the mayor vetoed it, citing fiscal responsibility. This year, Street's budget includes a one-time cut to the gross-receipts portion of the tax, the unpopular .21 percent toll on gains or losses. A bill proposed by Councilmen Michael Nutter, Brian O'Neill and James Kenney again proposes to phase out the BPT by 2017, and a bill sponsored by Darrell Clarke offers a three-year break for new businesses. Council could still adopt any of these bills, though it's more likely it will opt for some compromise between the involved parties.

Mandel says cutting the BPT will spur growth that would offset budget shortfalls, and he supports the gradual phase out — the more aggressive the BPT cuts, the better, he thinks — but he says a positive development is in the cards either way.

"The good news is that because we're arguing about what to do and not whether to do it, the hard-working residents of the City of Philadelphia will get relief. How much, we don't know," he says.

So Mandel goes out, puts on a smile and tries to make Philadelphians care about a complicated tax that they don't necessarily pay. After the video, he took questions from the Bella Vista crowd. Several people asked for clarifications about the BPT, and one woman shared her impassioned disgust for it. She is a writer and editor, she said, and is thinking of leaving town because of the tax. But the conversation soon shifted.

First, people began complaining about the city's use of tax money. "Where's all this money at?" asked one woman, sitting in a city-funded rec center. Then, a little old lady raised her hand.

"This is all good information," she said. "But what will happen to real estate taxes in this neighborhood over the next three years?"