Equal But Not Equitable

Why Lower-Income Philadelphians Pay more Property Taxes than Other Cities

City of Philadelphia skyline

Philadelphia’s poverty rate consistently ranks as one of the highest in the country  for major cities. Pew research has also found that Philadelphia has one of the highest tax burdens for lower income households for a major city. Right off the bat, this seems counter productive. If Philadelphians are already dealing with such high levels of poverty, why is the city insistent on taxing lower income households? 

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The answer is pretty simple, Philadelphia has to levy such high taxes because of Pennsylvania state requirements. Most large cities have taxes that scale based on property or income, which is also how federal taxes work. A person making only $24,000, doesn’t pay the same tax percentage as someone making six figures. Yet, in Philadelphia, that common practice is not reality. Pennsylvania has a clause in the state’s constitution called the "Uniformity Clause". This clause states that all taxes “shall be uniform, upon the same class of subject.” In simple terms, that means that if something or someone is taxed, the percent tax must be the same across everyone that pays it.

47 states actually have a form of the uniformity clause in their state constitution, but Pennsylvania is one of only three states that view this clause rigidly. Most states allow for some form of flexibility, but not Pennsylvania.

Where the issue arises here in Philadelphia is when such a large budget is being calculated. Philadelphia needs high revenue to provide functioning city services to its residents. But if it is considering raising taxes, the city government is unable to raise taxes solely on higher income earners or increase property taxes on wealthier areas like Rittenhouse Square or Center City. If the city is forced to raise taxes, people living comfortably in penthouses costing over a million dollars will not be as affected by the increase as the people living paycheck to paycheck.

Philadelphia city government has attempted to alleviate these burdens by offering exemptions for property or small business gross receipts, but these exemptions are occasionally shot down in court based on this Clause. Currently, the City has found a way to keep an exemption, through state approval, called the Homestead Exemption Act. The Homestead Exemption allows for homeowners that live in the residence to reduce their property taxes by $1,399 a year.

While homeowners may be able to alleviate some of the heavy property tax burdens in Philadelphia, renters are not so lucky. Renters bear the cost of increased property taxes through increased rents. This leads to less buying power for the average Philadelphia renter. 

Considering that nearly half of Philadelphia residents are renters and that two-thirds of low-income renters are primarily Black- and Hispanic-headed households,  with seniors aged 65+ becoming the fastest-growing population of renters in Philadelphia, any sort of increase in property taxes has deep impacts across groups that are already struggling.

But what can be done about this? How can Philadelphia fix its tax system? This is a multi-layered issue that cannot be fixed with a simple change. The process of repealing the Uniformity Clause would require two back-to-back sessions of the Pennsylvania House and Senate to pass resolutions, which would then allow Pennsylvania to vote on a referendum to remove the amendment. And even then, Philadelphia would still have to hold hearings and meetings to restructure its tax system.

This idea is often floated around by Philadelphia state representatives with occasional help from Pittsburgh. But there has been little progress in Harrisburg. Such a change would require heavy public support and campaigns.

In 2021, researchers did find a possible progressive tax system that could collectively save Philadelphian homeowners between $60 to $123 million a year. The plan is called a “Land Value Tax,” (LVT) which is used in other cities across Pennsylvania. An LVT would lower property taxes in outer and disenfranchised areas, while increasing the taxes on neighborhoods with more development and wealthier land. This happens because LVT’s tax the physical land based on the desirability of the location instead of the value of the house or building on the land. This change could drastically improve the financial burdens of property taxes on low-income homeowners and renters, while raising taxes on the people that can afford to pay them.
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For now, low-income Philadelphians continue to bear the financial burden of both paying higher taxes and living in a city that lacks the tax base needed for critical infrastructure. The difficulty of balancing the Uniformity Clause while also trying to fund the 6th largest city in the country, comes with the unintended consequences of heavily burdening low-income Philadelphians. This Uniformity Clause may be making taxes equal across the state, but it is not making taxes equitable.

Michael Iwan

Michael serves at AHCOPA as an AmeriCorps VISTA in the Housing Action Corps