PHILADELPHIA (KYW Newsradio) — Philadelphia has the fourth-highest tax burden among 27 big cities. And a new study from the Pew Charitable Trusts shows low-income Philadelphia homeowners have the lightest tax burden among city residents, while low-income renters have the heaviest.
Someone's tax burden is the percentage of their income that goes to taxes. For homeowners, Philadelphia taxes are progressive. That means the highest-income homeowners have the highest tax burden, paying 6% of their income in taxes — while low-income homeowners pay the smallest share, 2 ½%, according to Pew researchers.
Larry Eichel, senior adviser to Pew’s Philadelphia Research and Policy Initiative, says the key is the homestead exemption, which reduces taxes on homes that are occupied by owners by $80,000.
“That means a huge difference on the lower-income homeowners, many of whose houses are assessed at 80,000 or less, or a little bit more, and the homestead exemption wipes out their tax liability,” Eichel said.
For renters, however, the tax burden flips. Low-income renters end up paying nearly 13% of their income in taxes, while high-income renters pay less than 7%.
They pay not only wage and sales taxes but also higher property taxes, Eichel said.
“Renters may think that they don’t pay the property tax, but of course they do. They pay it indirectly through their rent,” he said.
City Finance Director Rob Dubow is pleased with the equitable tax burden on homeowners and frustrated that the city can’t do more for renters.
“We are constrained by the uniformity clause in state law, so we can’t, for example, have a different tax rate for different kinds of rental properties,” Dubow said.
One measure the city has taken is to offer a rebate on wage taxes for low-income workers, which could lower their overall tax burden — but Eichel says it is complicated and underutilized.
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