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Report: Tax gap between Philly and suburbs is shrinking

The city is more affordable than most surrounding towns

It’s more affordable to live in Philly now than it ever has been in nearly two decades, thanks to a dwindling tax disadvantage, according to a new report.

The tax gap between Philly and its suburbs has hit its lowest point in 15 years, diminishing to just 0.6 percentage points, according to Pew Cheritable Trust’s report “The Shrinking Tax Gap Between Philadelphia and Its Suburbs.”

A hypothetical middle-income family living in Philly spent 12.4 percent of its income on local property tax, state and local sales tax, and state and local income tax. That’s down 1.1 percent from 2000.

One percentage point may not seem like much, but consider the tax gap for those living in the suburbs and New Jersey. Last year suburbanites spent 11.8 percent of their income on taxes. That is a decrease from 2012, but a 2.7 percent increase from 2000.

The tax burden, in fact, is now worse for people who live in the suburbs but commute to work in Philly. While these households saved $300 in taxes in 2000, last year they lost $1,210.

The study authors say the reason for this shrinking tax gap boils down to one major factor: Property taxes.

Philadelphians experienced some tax relief after the city enacted the homestead relief program in 2013. It reduces the taxable portion of all Philadelphia homeowners’ property assessment by $30,000.

Meanwhile, property taxes in the suburbs, especially in New Jersey, rose. It increased from 6.7 to 8.7 percent between 2000 and 2015.

Like with most analyses, though, there are a couple caveats. The study authors write, “The tax burden on the hypothetical family may not match the reality for many residents, especially on the property tax, which is the most complicated element to compare across jurisdictions.”

Want to see compare your tax burden with the rest of the Philadelphia region? Use Pew’s interactive map.