Pew: Tax Gap Between Philly and Suburbs Is Shrinking

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It’s not great – but it’s getting better.

A new Pew Charitable Trusts report found that the tax disadvantage of living in Philly has dropped to its lowest point in 15 years.

The report, titled “The Shrinking Tax Gap Between Philadelphia and Its Suburbs,” compared the tax burden for city residents to that of people who live in surrounding suburban towns and found that Philadelphia has slowly become more affordable in terms of taxes.

According to the report, a middle-income family with a home in the city spent 12.4 percent of its income in 2015 on taxes (including local property tax as well as state and local sales and income taxes), while the same family living and working in the suburbs of Pennsylvania and New Jersey had an average tax burden of 11.8 percent — a difference of just 0.6 percentage points. In 2000, the difference was 3.7 points.

“Pew’s research shows that a middle-income family that would have saved $2,410 in taxes in 2000 by living and working in the suburbs instead of the city would save only $390 in 2015,” Thomas Ginsberg of Pew’s Philadelphia research initiative said in a press release. “The tax gap is a useful measure of Philadelphia’s tax competitiveness and can help local officials across the region gauge their tax decisions in relation to other municipalities.”

Pew attributed much of the shift to property tax adjustments, including the Homestead Exemption measure, which Philadelphia adopted in 2013.

The Pew report analyzed state and local tax rates in Philadelphia and 354 other municipalities in Pennsylvania (in Chester, Bucks, Montgomery and Delaware counties) and New Jersey (in Camden, Burlington, Gloucester and Salem counties). Rates evaluated were in effect for 2015–16, 2012–13 and 2000–01.

The study found that Philly has the 97th-heaviest tax burden out of the municipalities studied. In 2000, the city had the third-heaviest tax burden out of the 100 poorest communities in the area, and in 2015, it had the 59th-heaviest, according to Pew.

The study also found that the worst tax situation applied to suburban residents who work in Philadelphia. Those homeowners saved $300 in 2000, but in 2015, with inflation taken into consideration, lost $1,210, according to Pew.

For more information on the report, visit Pew’s website.

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