Philadelphia's Earned Income Tax

Abstract

The city of Philadelphia is tapping a new source of revenue for $18,000,000 in 1940. Events leading to its adoption have their basis in the past ten years of financial distress. These events were not peculiar to Philadelphia. They may be found in one form or another as budgetary problems in many leading municipalities of the nation. Outstanding among the factors causing distress in Philadelphia was a 25 per cent decline in the assessed valuation of real property since the peak year 1931. This represented over a billion dollars of valuation and a loss of $20,000,000 in current real estate tax levy. Since current real estate has been the chief source of the city's annual income, the decline resulted in curtailment of essential city services and reduction of personnel.For some years, curtailment of services, reduction in personnel, and the fortunate receipt of large annual sums from delinquent taxes enabled the city to survive the difficulties of the depression. However, the point was reached when these factors no longer sufficed to balance the budget. They were followed by more doubtful financial expedients, namely, overestimating of yearly receipts, floating of current deficits by means of temporary loans, and short-changing of sinking funds through excessive valuation of sinking-fund assets.