The Pew report states that large businesses face a 7.1% effective tax rate on their gross revenue, while small and very small businesses are taxed at 3.2% and less than 1%, respectively. This reflects how businesses perceive the impact of taxes on their profits.
The median effective tax rate for the Business Income and Receipts Tax (BIRT) is 3.5% for all businesses combined. However, different industries face varying tax rates, with wholesale trade businesses paying 6% and real estate companies paying 2.1%. The unique tax structure in Philadelphia, which taxes both net income and gross receipts, results in different tax burdens across industries.
Despite being a significant contributor to the city’s revenues, not all industries pay equally relative to their size. Nonprofit entities like universities are in a separate bracket, while the health care and social assistance industry accounts for only 5% of BIRT revenue despite representing 24% of city jobs. On the other hand, professional, scientific, and technical businesses contribute the most to BIRT revenue with 25%. Last year saw a slight reduction in the BIRT tax rate but it is unlikely that further relief will be provided by Mayor Cherelle Parker under the new administration.
This disparity in tax rates across industries highlights the complexities within Philadelphia’s tax system.
