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Greater Philadelphia Chamber of Commerce Testifies Against Paid Sick Leave Legislation

Posted Tuesday, March 5th, 2013

Member News, Public Policy, Advocacy

Today the Greater Philadelphia Chamber of Commerce offered testimony opposing Bill 130004, “Promoting Healthy Families and Workplaces,” otherwise known as Mandatory Paid Sick Leave.  Read GPCC Executive Vice President, Joseph W. Mahoney Jr.’s testimony before City Council below.

Good morning Councilwoman Tasco and members of the Public Health and Human Services Committee. For the record, I am Joseph W. Mahoney Jr, Executive Vice President at the Greater Philadelphia Chamber of Commerce. I thank you for the opportunity to comment again this year on the issue of mandatory paid sick leave.

As we did in 2011, the Chamber opposes mandatory paid sick leave. That year we shared a study which was done by Temple University Professor William Dunkelberg and estimated that the previous bill would cost at least $350 million and eliminate 4,000 jobs. We believe that even with some modifications that the sponsor has made that the costs to business will remain substantial.

There has been much talk about the experience in San Francisco.  We have been told that it was not a burden on business, but it must be pointed out that the two cities have very different tax structures.

First, let’s look at the array of business taxes that exist in San Francisco vs. those in Philadelphia.  Currently, San Francisco has a Payroll Expense Tax imposed on corporations, estates, individuals, pass-throughs and trusts conducting business in the City.  It is levied on separate company compensation paid for services performed in the city at a rate of 1.5%.  There is an exemption for taxpayers with less than $250,000 in taxable payroll tax expense.

Starting in 2014, San Francisco will begin a 5-year phase-in of a gross receipts tax with progressive rates that vary by industry.  There will be a $1 Million exemption for taxable receipts. There is no wage or School income tax. There is a business registration fee which currently ranges from $25 to $500 based on payroll expense.

In short, the taxes levied on business in the City of San Francisco are not as onerous as those currently imposed in the City of Philadelphia. Imposing another cost on business – particularly on small business – is more burdensome in Philadelphia than in San Francisco.

Recent Bureau of Labor Statistics unemployment data paints a compelling picture of the competitive nature of business regulation in the five-county area.  Philadelphia’s unemployment rate at 10.6% remains only behind Salem County, New Jersey (11.5%), while our contiguous Pennsylvania suburbs were significantly lower.  Delaware County was at 7.9%, Bucks County at 7.2%, Montgomery County at 6.7% and Chester County at 5.9%.

I think that it is doubtful that any of our neighboring counties would consider mandating this kind of issue on their business communities.  They recognize that increasing the cost of doing business causes businesses to rethink their location decisions or to limit the number of employees added to the business. We should be seeking ways to increase jobs, not promulgating more regulations.

If the Council truly believes that this benefit is important to the success of the City and its citizens, there are ways for City government to encourage that behavior.  On September 28, 2012, I had a meeting with Councilman Greenlee to discuss a host of issues.  Before leaving, I asked if he had considered creating incentives for businesses, particularly small businesses, to provide paid sick leave for their employees.  After all, everyone recognizes that providing this benefit would create costs- the question is, who should bear that cost?

On February 19, 2013, Council’s Jobs Commission issued its report.  In the list of recommendations made by the Commission, Recommendation #5 stated: “The City should pursue tax reform, regulatory reform, infrastructure investment and partnership services to improve the climate for small business.”  The report stated that this recommendation was designed to “Make the City a “best place for small businesses.”

Section 6.5 of the Commission’s report, titled Principle #4- Targeted Tax Incentives reads:

“As part of an overall tax policy, a locality may choose to make available various tax incentive programs targeted to specific industries, populations or actions, with the intention of stimulating more activity in those areas and broadening the overall tax base.  Tax incentives may include a package of credits designed to attract a business or industry to the City, or a credit program intended to encourage certain desirable business actions (e.g. for hiring ex-offenders, for new construction or major rehabilitation).  This too is a lever that the City largely controls on its own, and so can wield to great effect in increasing job creation and retention.”

If it is desirable for the City to encourage businesses to provide added benefits for its employees and distinguish itself as a “best place for small businesses”, encouraging and incenting businesses to offer leave would be far preferable to adding an unfunded mandate.

At a time where our economy is extremely fragile, jobs are not plentiful and U&O taxes were raised on the business community by 19% last year, we believe that mandating additional burdens on business is shortsighted. We believe that this bill will damage the City’s competitive position in the region and will undermine the goals established by the Jobs Commission.

I thank you for the opportunity to offer these remarks.

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