Op-Ed: Cap Philly's 10-Year-Tax Abatement

Ira Goldstein, president of Policy Solutions, and Emily Dowdall, chief of development and policy implementation at the Reinvestment Fund, write a guest opinion piece for the Philadelphia Inquirer:

Philadelphia’s 10-year tax abatement is fundamentally a tax expenditure:  not the benign concept of “money we never had” but more like writing a check from the city to the developers or buyers of new or substantially rehabilitated properties. Extreme cases such as abating $2 million townhouses prompt us to ask: Is this a wise expenditure for the city or school district?

The opinion piece was prompted by news of a luxury townhome development, each of the ten units expected to sell for $2 million, that would receive the tax abatement. "Assume an average price for these townhouses of $2 million per unit and that 20 percent of the $2 million is the value of the land for which tax will be owed; $1.6 million per unit will be exempt from the Philadelphia real-estate tax," explain Goldstein and Dowdall. "The city’s annual tax expenditure per unit will be $23,315 per unit (with the proposed 2019 tax rate of 1.4572)."

The writers present their argument against the abatements by refuting a series of arguments in favor of the abatements—i.e., the market requires stimulation, the abatement lowers the cost of construction, and it's an investment that eventually yields more revenue.