The Honorable Darrell Clarke
President, City Council
City Hall, Philadelphia, PA 19107
Dear Council President Clarke and Members of the City Council:
On behalf of National Taxpayers Union (NTU) and our members across the Philadelphia metro area, I write to express our opposition to Bill No. 180351, a proposal that would impose a tax on construction projects. This legislation will have serious implications for Philadelphia’s economy, renters, businesses, and workers. For these reasons we urge the City Council to vote down this ill-conceived tax measure.
This bill would institute a 1 percent tax on all construction projects undertaken in the city in order to fund affordable housing initiatives. Everyone supports the goal of making housing more affordable for working class people; however, we are concerned that this proposal will increase the cost of housing, not lower it. First, taxes increase the cost of construction and thereby cause the final product to be more expensive. As is usually the case with added costs, they will be passed onto consumers through higher prices, which in this case will raise the price of rent for tenants. Second, a tax will disrupt the equilibrium of supply and demand in the housing market. A tax would likely reduce investment for housing development and cause some projects to go unfulfilled, which could slow the supply of housing and thus cause rental prices to rise.
Rather than tax hikes that would make it more expensive to build within the city, councilmembers should embark on meaningful reforms that make living in Philadelphia more affordable. A good place to start would be with cutting the city’s high property tax rate. Just last year the average property owner faced a property tax bill that was 11 percent higher than the year prior, which can be a real barrier for people looking to make the jump from renting to buying. Councilmembers should also look at ways to reform the city’s zoning regulation system, which can act as implicit taxes and make building construction more expensive.
While you do your due diligence and weigh the costs and benefits of enacting this tax, we sincerely hope that you consider the implications, both intended and unintended, for taxpayers, renters, and construction workers, as well as the economic climate in Philadelphia. Thank you for considering our comments as you debate the merits of this proposal. Should you need any further information or taxpayer perspectives, please consider NTU a resource.
Sincerely,
Thomas Aiello, Policy and Government Affairs Associate
CC: Mayor Jim Kenney