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1 Joseph Henchman, County and City Income Taxes Clustered in States with Poor Tax Climates 1 (2008)

handle is hein.taxfoundation/ffbddxz0001 and id is 1 raw text is: FOUNDATION
County and City Income Taxes Clustered in States with Poor Tax
Fiscal Fact No. 133
By Joseph Henchman
July 11, 2008
Beginning July 1, 2008, workers in Philadelphia will see a little bit more in their paychecks.
That day marks the second reduction within a year in that city's wage tax imposed on both
residential and nonresidential workers in Philadelphia, although it remains the highest in the
The new rates are 3.98% for residents (down from 4.219% in early 2008 and 4.26% in 2007)
and (precise to the ten-thousandth digit) 3.5392% for nonresidents (down from 3.7242% in
early 2008 and 3.7557% in 2007). Thus, a resident who earns $1,000 a week will keep $124
more per year; a nonresident earning that much will keep an additional $96.
Local income or wage taxes can be a part of a sound tax system, particularly if revenue is
used to reduce other taxes that may do more economic harm. Using local income tax revenue
to reduce corporate income taxes or property taxes can still produce a friendly tax climate.
However, local-level taxes on wages and income are clustering in areas with poor business tax
climates. Philadelphia is one of just six of America's twenty largest cities by population that
impose a city- or county- level tax measured by compensation, be it a tax on wages, earned
income, or occupational privilege.' (The others are New York City, Detroit, Indianapolis,
Columbus (OH), and Baltimore. It should also be noted that Washington, D.C., while
imposing a state-like income tax on its residents, has long sought to impose a commuter tax
on nonresident workers, but is prohibited from doing so by federal law.2

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