Center City District Calls For Philly Business Tax Reform

While Center City is on a residential upswing with a wave of newly converted apartments leasing up, a lack of business growth remains a roadblock for the neighborhood’s post-pandemic economic recovery.

An unwelcoming tax climate for businesses in the city is one of the main challenges for the neighborhood that Center City District identified Wednesday in its 2026 State of Center City report, along with SEPTA’s precarious financial situation and the homelessness crisis.

The city made slight reductions to its business income and receipts tax last year as Mayor Cherelle Parker signaled her long-term desire to get Philadelphia’s wage tax below 3%.

But Center City District CEO Prema Katari Gupta said she doesn’t think that was enough.

“Incomplete tax reform continues to suppress business growth and corporate relocation,” she said at a Wednesday morning event debuting the organization’s report.

“We don’t need more business taxes. We need more businesses that pay taxes,” Katari Gupta added.

CCD found that Center City’s office sector has 20% vacancy after millions of square feet were pulled off the market for conversions. Another 2M SF, or 5% of the neighborhood’s office stock, is now in the pipeline for similar projects.

In 2024, the city reconvened its 15-member Tax Reform Commission, which released its findings last February. In addition to a 20-year abatement for office conversions, the group recommended eliminating the business income and receipts tax altogether.

Last year, the city reduced the BIRT net income tax by 100 basis points to 5.71% as part of a plan to get it to 2.8% by 2039. It also cut the millage rate for the gross receipts portion of BIRT from 1.415% to 1.41%. That is set to be eliminated entirely by 2039.

Parkway Corp. CEO Robert Zuritsky, whose firm owns two of Center City’s newest office buildings, occupied by Chubb and Morgan Lewis, has been beating the drum for more aggressive tax reform.

“I’ve literally been talking about this at least once or twice a week in front of different groups, and people are very interested,” he told Bisnow earlier this month.

The executive said the city’s budget is in a solid spot, which hasn't historically been the case, and with more job growth expected in the Navy Yard and the Bellwether District, now is the time to make these changes.

“The city needs to take the [Tax Reform Commission's] recommendations and do a 10-year tax reform plan that makes us competitive and sets us up for the next 50 years where our citizens, our business will prosper going forward,” said Zuritsky, who wasn’t a member of the commission.

He said the city should take cues from recent tax reforms made at the state level.

Pennsylvania’s corporate net income tax sat at nearly 10% before 2022, but a bipartisan effort to lower it means it is scheduled to fall to just under 5% by 2031.

“We lost every deal to Ohio, Tennessee and Texas for the last 20 years,” Zuritsky said.

But Pennsylvania has scored some big new development projects in recent months.

Beverage manufacturer DrinkPAK picked the Bellwether District for its 1.4M SF flagship East Coast facility in December. 

Then Eli Lilly picked a Lehigh Valley site for a $3.5B manufacturing plant in January, and Johnson & Johnson announced plans for a similar $1B facility in Montgomery County the following month.

Beyond business taxes, CCD is taking steps to address another challenge its report identified: homelessness. 

Katari Gupta said CCD is adding two more members to its four-person homelessness outreach team to assist people living on the street. She has previously said the homeless population creates an optics issue that has hampered the neighborhood’s post-pandemic recovery.

The other top challenge it faces, SEPTA, remains in a precarious financial position, CCD Vice President of Economic Development Clint Randall said.

“Nothing has fundamentally changed about SEPTA’s funding outlook, and something needs to,” he said.

“It doesn’t necessarily mean we have to rely so heavily on Harrisburg,” Randall added. “There are perhaps regional solutions and mechanisms adopted from other places that are worthy of investigation.”