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Pew researchers measured Philly’s business tax burden. Here’s what they found

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Pew researchers measured Philly’s business tax burden. Here’s what they found

According to the Pew report, the very large businesses are levied a 7.1% effective tax rate on their gross revenue compared to 3.2 % for small businesses. The very small businesses pay less than 1%.

“The effective tax rate, or the tax burden, is really a reflection of what businesses experience from taxes, what they feel,” Ginsberg said. “It’s the hit on their profits.”

The median effective tax rate for BIRT is 3.5% on businesses, data shows.

Wholesale trade businesses pay the highest effective tax rate of 6% while real estate companies pay 2.1%. The reason for the difference is how different industries operate, especially with such a unique tax structure that doesn’t exist in most cities.

“It’s a tax on both net income and gross receipts. Other cities, if they have a business tax at all, are on one of those, not both,” he said. “It’s one of the reasons that the tax burden varies across industry sectors because sectors have different relationships to net [income] and gross [revenue]. A real estate company may have a lot of net income but a wholesale company doesn’t.”

When the BIRT and Net Profits Tax are combined, it accounts for roughly 16% of city revenues.

But not all industries pay the same in relation to their size. Nonprofit entities such as universities come under a different bracket. The health care and social assistance industry represents 24% of all jobs in the city, but it accounts for just 5% of BIRT revenue.

The largest industry sector that contributes to the city’s BIRT revenue are the professional, scientific and technical businesses, with 25%.

Last year, Philadelphia City Council and former Mayor Jim Kenney’s administration lowered the BIRT tax rate slightly. But businesses will not receive that kind of relief under the new City Council and Mayor Cherelle Parker’s administration.

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