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Tax Breaks for Luxury | Philly Tax Bill



Tax Breaks for Luxury Towers Spur Redevelopment, and Backlash

Many smaller to mid-size municipal markets have been recently issuing tax breaks in order to fuel growth in their downtowns. The most disconcerting element of this is the fact that the breaks are going to luxury housing. Proponents of the move have claimed that it's necessary to bring development to their cities, while those hesitating lament over the loss of revenue that they'd like to use for schools or infrastructure.

It's hard to tell if cities will successfully be able to wean off of such incentives, when other cities are still offering such tax treats. The argument stands that future taxes will offer the funding that cities need, but it's hard to say when some abatements, like one in Kansas City, last for 25 years. Sooner to tell, will be if the luxury towers will actually draw in more commercial development- giving the cities valuable property taxes in the interim.

 The Controversial Tax Bill, Explained

 In Philadelphia, a construction tax bill is currently in limbo while the mayor attempts to compromise. The bill is actually combined into two - one that puts the tax in place, and another that directs its use. The first was originally was meant to implement a 1% construction impact tax on anything that would require a building permit (less non-profits or affordable housing). The second directs the funds to be used for affordable housing.

There are concerns from both supporters of the initiative and opponents. Opponents are worried that the tax will discourage development, while some supporters of the approach are criticizing the leniency in terms of what is considered "affordable." The supporters are right to be concerned- a maximum income is set at astoundingly high $105,000.

The proposed compromise rejects a tax, instead offering to use money from new real estate taxes- new, because they will be coming from properties whose 10 year tax abatement is ending. Tomorrow will tell how the city decides.

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