How Small-Business Unfriendly Is Philadelphia?

They made me pay my taxes twice.

Paying taxes this year made me understand the nut jobs in the Tea Party.

A recent study shows that Philadelphia is about as hospitable to small businesses as porcupines are to cuddling. While CardHub’s analysis cited Philly’s small business vitality, unemployment, stress and cost of living among its reasons for naming Philly the fourth worst of the United States’ 30 largest metropolitan areas, I’ve got my own axe to grind. In 2012, although I have a full-time job, I also filed taxes as a small business on account of my modest but burgeoning freelance earnings.

The City of Philadelphia has made me question whether hustling for extra assignments and paychecks is worth the effort—the exact opposite of the enterprising, entrepreneurial spirit so cherished in these days when startups are cooler than bands.

To wit:

  • 2012 was my first year filing as a small business. For the “privilege,” I had to pay $300 for a “lifetime” license. Of course, this year the once ranklingly named Business Privilege License is now called the Commercial Activity License and costs just $50. To make everything just a little more infuriating, next year, all Commercial Activity Licenses will be free ( >:-[  ). But whatever, I try to stay in the right side of the law, and this didn’t seem like the cause to get all civil disobedient about.
  • Because this was my first year filing as a small business, the city didn’t simply hit me for an additional 6.5 percent (on top of what the feds and the state tooke me for). No, it billed me for next year as well. Because what every fledgling business needs is to pay extra taxes in its first year.
  • How much extra tax, you ask? The city determined what I’ll owe next year by assuming I’ll make exactly as much this year as I did last year—with no option for quarterly payments like you’ll get for your federal tax. So my city tax bill my first year as a small business was actually 13 percent of what I netted.

Look, I can see how a business that’s, y’know, a real business with a business plan and inventory and employees and P&L statements and spreadsheets and an honest-to-god accountant might be able to anticipate from year to year its net income. But for full- and part-time freelancers like me—who generally have their heads up their asses financially and whose income might fluctuate wildly from year to year—this makes no sense. For instance, 2012 was a particularly aggressive year for me as a freelancer. I had a wedding coming up and was busting my hump for a little extra scratch. This year, I’ve cut way back because a) who has time to freelance when they’re planning a wedding? and b) hey, now that I think about it, if I slack off a little this year, maybe I’ll get some of that giant tax bill back this year, right?

It pains me a bit to write some of this because I think that, for the most part, people who whine about taxes should go live in a country where roads and highways and bridges aren’t maintained by the state and the simple act of driving on them involves taking one’s own life into one’s hands (hey, like the U.S., perhaps …). But it’s not actually the tax that cranks me up; I earned the money I should pay my share.

  • It’s the inconsistency of the licensing (I’ll never get that $300 back).
  • It’s the fact that while the city’s finally realized that it’s asinine to require a license to earn a living, it’s taken three years to actually enact the policy.
  • And it’s that forcing a business to pay taxes twice in its first year isn’t just unfriendly, it’s hostile.

Maybe instead of taxing small businesses double in their first year, Philadelphia could consider, I dunno, not taxing them at all their first year, or spreading those first year’s taxes out over the next couple. You could almost call that small business hospitality.