Philly’s Taxing Bloggers … on $11 Profits?

Did you hear that the city of Philadelphia wants to tax bloggers? Philly’s been in the news this week because of a kerfuffle prompted by City Paper’s story about bloggers who ran up against one of the city’s nastiest tax surprises: the Philadelphia business privilege tax. The story focused on two Philly bloggers who earned blog income in the low double digits. These meager earnings were nevertheless subject to the BPT, a cost-of-doing-business tax that requires Philly earners to pay $50 a year (or $300 for a lifetime license) for the privilege of making dough in our fair city.[SIGNUP]

The BPT mostly applies to businesses, but it also comes into effect when individuals earn money outside of their salaries. Freelancers and consultants are always hit with the BPT, and now bloggers are discovering that their online earnings are subject to the BPT as well.

As I see it, the problem isn’t just that bloggers are being taxed. Income is income, and if you make money blogging it makes sense that you would have to pay taxes on it. The much bigger problem is that most bloggers don’t make very much money. Individual blogs tend to be hobbies, not profit centers. Even bloggers for hire don’t make that much. Online writing rates currently hover around $0.01 a word, compared to $1 or $2 a word at many print magazines. The Huffington Post, the runaway success story in the blogosphere, uses 6,000 unpaid bloggers (myself included) and has a paid editorial staff of only 88 people.

Philadelphian Sean Barry, who writes a music blog called Circle of Fits, claims he has made only $11 over two years from ads on his blog. However, he never even collected the money from his advertising partner, Google AdSense. In a recent post, he wrote: “I don’t even know how to GET that 11 dollars that I’ve made … it’s out in the digital ether somewhere.”

Like everyone else, I’m aghast that someone earning less than $50 in passive income should have to pay $50 a year (or $300 for a lifetime) for the “privilege” of earning money in Philadelphia.

I’m also a little horrified at the idea that Google has a probably-giant slush fund of uncollected ad earnings from millions of people like Barry who’ve inadvertently “invested” $11. That money is sitting somewhere, earning interest, and bloggers aren’t going to see a penny of it.

Clearly, something needs to be done. We could easily start by revising Philly’s tax regulations. Shouldn’t you be exempt from the business privilege tax if you pull in less than $1,000 a year from blogging or freelancing or baking custom cupcakes or whatever you do on the side?

In her original City Paper article, Valerie Rubinsky wrote that City Council members Bill Green and Maria Quiñones-Sánchez will propose a bill in September that will allow people and businesses to earn up to $100,000 in profit without paying the BPT.

This would help out double-digit earners, sure. But I call bullshit on the notion that eliminating the BPT on the first $100K will prompt more people to start small businesses in Philly. A $300 one-time fee is not getting in the way of anyone with a solid business plan. Philly has excellent microlending programs; if you can’t get together a couple hundred bucks from investors or loans in order to pay your business licensing and startup fees, you probably shouldn’t be starting a business. The city’s wage tax, on the other hand—getting rid of that will definitely jump-start small (and large) business development.

Ironically, now that his blog has been featured on NPR and Fox News and on a variety of international news bulletins, Barry’s ad revenues are certain to go up. Media coverage for your blog means more eyeballs, which means you can increase your ad rates and earn more money.

This tax bill may actually increase Barry’s blog profits. If so, the City will certainly want its share.