Hey You Guys: In Philadelphia, Paying Your Taxes Is Basically Optional
Hey, Millennials! Everyone has been trying to convince you that Philadelphia is an awesome place to live, and it is. Sure, we have lots of crime. Yes, parts of the city are disgusting and filthy. And it’s true that race relations are as hot and sticky as a Biloxi summer. But the restaurants and bars are great. And we’re fairly walkable. And the biggest benefit of living here, working here and owning a home here of all: You don’t have to pay your taxes.
Oh, don’t misunderstand me. As a technical matter, you do have to pay your taxes in Philadelphia, just like you have to pay your taxes in any other place in the United States. It’s, you know, the law. But as a practical concern, you, as a proud Philadelphian, can just say, “Taxes? What taxes?” It’s true. I wouldn’t steer you wrong.
You see, while Philadelphia may have spiffy new bikes lanes and an about-to-debut bike share program (finally!), and while you can now walk around with weed in your pocket without winding up in the slammer, this progressive, forward-thinking, 21st Century type of mindset tends not to extend to certain branches of Philadelphia government. Most notably: the Department of Revenue, an agency housed in the cruciform Municipal Services Building at Broad and JFK, just a hop from City Hall. That’s the Municipal Services Building there in the photo, with that guy doing the Sieg Heil in front of it. (OK, OK, that guy, former mayor Frank Rizzo, isn’t really doing the Sieg Heil, but some of his policies were considered rather Gestapo-like.)
You probably think that I’m exaggerating when I say that the Department of Revenue is utterly incompetent. I’m a writer, I’m supposed to say things that stir the pot and get clicks, yada yada yada. But this is no exaggeration, hyperbole or click-bait. The fact is, if you performed as poorly at your job as the Department of Revenue does at its, you’d find yourself eating at food trucks on a regular basis. (And I’m not talking about $12-burger type of food trucks. I’m talking $2 egg-and-cheese-cooked-by-a-sweaty-guy-who-may-not-have-washed-his-hands-all-day type of food trucks.)
I’ll give you some examples of just how utterly incompetent the Department of Revenue is:
The last time you sat down at a bar in Philadelphia and ordered a drink, the owner of that bar probably charged you a special liquor tax, and 100-percent of that tax is earmarked for the beleaguered city schools. So you don’t mind paying it, right? The thing is, your obligatory schools tithe only goes to the schools if the bar turns around and forks over that money, which is often not the case. At the end of the last fiscal year, the city was owed more than $36 million in delinquent liquor taxes, because some bars just don’t pay it. Our former mayor Ed Rendell once told an interviewer that Philadelphia looks the other way when it comes to the liquor tax.
But it’s not just the liquor tax that has Philadelphia turning its head. In reality, the liquor tax is the proverbial tip of the iceberg. And what a hugely mind-warping, it-would-be-funny-if-it-weren’t-so-awful iceberg it is: Philadelphians owe a whopping $1.17 billion in uncollected city taxes, interest and penalties. More than a billion dollars! That would come in handy, eh? And just who is responsible for collecting this $1.17 billion in uncollected money. Yep, your friends at the Department of Revenue.
Other taxes that people don’t like to pay here: the much-maligned Business Privilege Tax ($310 million in outstanding revenue); wage tax ($205 million); and real estate tax ($467 million). That real estate tax accounts for about 40 percent of all taxes owed, and Philadelphia has one of the worst real estate tax delinquency rates in the country, with some accounts laughably dating back to 1974.
“All cities are better at collection that Philadelphia,” fiscal watchdog Brett Mandel told me when I reached out to him to try to wrap my head around this problem of positively perplexing proportions. As far is Mandel is concerned, Philadelphia is technologically deficient in its collection efforts (we half-jokingly imagine that someone in that big ugly building is still running MS-DOS), but also afraid to get aggressive, especially when it comes to that nearly half a billion in real estate taxes.
“The city doesn’t want to be seen taking people’s houses away,” Mandel observed. “That’s not politically beneficial. So, if you are a scumbag, you know the city is the last person that you need to pay and you make that part of your overall business strategy.”
Now, the Department of Revenue likes to whine about how hard it is to find the owners behind a lot of those delinquent properties, and if you can’t find the owner, who are you going to collect from, right?
Well, Mandel points to oft-mocked mayoral candidate Milton Street for the answer. Street has said that instead of spending all of this time and money trying to find the property owners to hand them a bill, the city needs to get tough by simply taking their properties and making them find us. It’s pretty bad when you have to look to Milton Street for solutions to your tax problems.
To be fair, the city isn’t completely ignoring our massive tax abyss. Two years ago, Mayor Michael Nutter announced big plans to combat the problem. He proclaimed an all-out war on scofflaws. And boxing legend Bernard Hopkins was even roped into doing a public service announcement: “Pay your taxes… Or else!!!”
That PSA is still up on the Delinquent Accounts page of the city website, next to boxes intended to out tax scofflaws. Alas, that data is still listed as “Coming Soon,” as it has been since 2013:
The Department of Revenue has made some progress since Mayor Nutter’s proclamation, but it is merely a “dent,” in the words of City Controller Alan Butkovitz, whose job it is to make sure all of the numbers in the city are copacetic. And when it comes to the Department of Revenue, Butkovitz says his hands are, effectively, tied.
“It’s impenetrable,” Butkovitz complains of the department. “The problem with Revenue is that information constantly goes into it but never comes out. So it’s impossible for us to know exactly what’s happening … they are very sensitive about us reviewing and grading their performance.”
Indeed, the Department of Revenue is about as monolithic as they come in local government bureaucracy. After originally providing me with a nice spin memo outlining their “accomplishments” (accomplishments that were only commendable in light of the total lack of accomplishment prior to 2013), they wouldn’t grant my request for a proper interview.
And even when you do get information out of the Department of Revenue, that doesn’t mean it’s going to be right.
I didn’t have to look too far to find folks who’ve had their fair share of trouble with the department. In fact, two work right here with me at the magazine.
One columnist has had multiple battles with the department over taxes they said he owed, and he once had to present a canceled check for taxes that he paid but that they had no record of. “They just didn’t bother processing the payment,” he says.
And an editor here has been trying to get overpaid taxes back from the city, but to no avail. “They’re holding $1,500 hostage over what have amounted to $1 or $2 discrepancies on my part or complete mistakes on their part,” he explains. “I got an accountant involved and he was basically like, ‘Yeah you’re owed it, but don’t count on seeing it anytime even remotely soon.’ It’s convinced me that everything business owners say about doing business in Philly is absolutely true.”
That’s pretty excruciating.
But even more gut-wretchingly painful is this: I asked the Controller’s office for an accounts receivable report showing all of the outstanding tax delinquencies in Philadelphia, and they had the Department of Revenue produce it. It should have been a straightforward database output report — except that an entry that read $303,541,491.70 should have read $1,303,541,491.70. Yes, a difference of one billion dollars. When I asked about it, I was told that the computer system used for these reports sometimes has an issue with numbers in the billions place. No, I’m not kidding.
Welcome to Philadelphia!
Follow @VictorFiorillo on Twitter.