Tax Policy and the Impact on Employment in Upper Merion Township/King of Prussia A Summary of Tax Policy Analysis Conducted by Econsult Solutions, Inc. and the Economy League of Greater Philadelphia for the King of Prussia District
April 2015 Taxation and the applied tax policies that school district’s, municipalities, and counties have often play a big part in the way businesses and their site selection representatives make decisions about where to locate. Therefore, the total tax burden on commercial entities needs to be carefully balanced in any municipality to make sure that the local government has enough funds to cover necessary operational expenses without having the tax burden be so high that it begins to negatively impact economic development and job growth. In Upper Merion Township/King of Prussia (UMT/KOP), we are fortunate to have extremely low municipal and county taxes as well as a reasonable school tax. The result is that UMT/KOP has the third lowest overall real estate tax in Montgomery County. But despite UMT/KOP’s low real estate tax and its status as the largest employment (53,000+ employees, Census 2010), commercial office, industrial and flex space, retail and hospitality center in the suburban Philadelphia region, it has continually suffered from lingering perceptions as a high-tax business location. Industry experts routinely cite the business privilege tax (gross receipts tax) and the confusion with the formula, and method by which the tax is applied, as a primary reason for this ongoing perception. In order to determine whether or not this high tax business location concern is more perception or the harsh reality, the King of Prussia District (KOPBID) set out to gather accurate data about the subject of business taxes and their impact. In 2011, KOP-BID hired two well-respected organizations from Philadelphia who have conducted numerous studies on the topic of business tax impacts: Econsult Solutions, Inc. and the Economy League of Greater Philadelphia. These firms completed three studies. Econsult Solutions, Inc. and the Economy League completed the first report together. Econsult Solutions, Inc. completed the second and third reports independently. The overall report themes are best summarized as follows: • REPORT I: Evaluate the current tax structure of UMT/KOP and how it compares to other significant commercial office locations in the region • REPORT II: Analyze historical data on employment mix and commercial office markets of UMT/KOP and competing locations, devise a summary of market trends, provide a framework for developing strategies to improve UMT/KOP’s competitive position • REPORT III: Develop preliminary tax policy recommendations. The key findings of the reports are: • UMT/KOP is the largest employment and commercial center in the suburban Philadelphia region • UMT/KOP’s reputation as a high tax business location is overstated • UMT/KOP ranks only 5th out of the 10 largest business centers in the Philadelphia region in terms of total tax burden on business •C hallenges with retaining and attracting office tenants are amplified for UMT/KOP because of its proximity to the lowest tax business location (Tredyffrin Township) • UMT/KOP job growth has been slow relative to its low tax neighbors since 2002 • Property values and tax revenues have been stagnant in UMT/KOP since 2002
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