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May 10, 2004

Chancellor: End Tax Inequities and Adopt Reforms or Face Exodus

Calling for "an end to tax inequities" and additional tax reforms, Philadelphia Bar Association Chancellor Gabriel L.I. Bevilacqua today told members of Philadelphia City Council that "without a more competitive tax climate, Philadelphia will not prosper and well-known Philadelphia law firms may eventually be forced to maintain only a nominal presence within the city limits." (View the full testimony HERE.)

"I cannot overstate the importance of the tax reform measures which you are considering and the actions which you may take," Bevilacqua said. Speaking for the 13,000-member Bar Association, the Chancellor told City Council members that they could begin to move in the right direction by eliminating a provision of the Philadelphia business tax which effectively penalizes businesses conducted in partnership vs. those conducted in corporate form. "Right now, the city effectively taxes partner income at a combined rate of at least 6.7 percent but taxes compensations paid to owners of businesses operated as corporations or sole proprietorships at a rate ranging from 3.9 percent for non-residents to 4.5 percent for residents."

Bevilacqua said that this constitutes an inequity. He further argued that the affected law firms and businesses were also penalized through the tax on net income because they cannot deduct payments made to partners, even where partners perform a significant level of service on behalf of the partnership.

Bevilacqua, a partner with the firm of Saul Ewing, was joined in his testimony by Vice Chancellor Alan M. Feldman, a partner at Feldman, Shepherd, Wohlgelernter and Tanner. The Chancellor said the full leadership of the Bar Association "wants to demonstrate the sustained commitment of our Association and its members to tax reform. We're not asking for a special treatment. We simply want tax equity and reasonable reform."

Taking the members of Council on a "virtual walk up Market Street West," Bevilacqua pointed to 12 nationally known Philadelphia law firms on Market Street, which employ nearly 5,000 people. The Chancellor told Council members that the 23 largest Philadelphia law firms employ nearly 10,000 people. "If these law firms were part of one company, they would be one of the biggest companies in the region," Bevilacqua said. "What's more, these firms represent only about one-third of all Philadelphia lawyers and support staff."

"Think of where Philadelphia would be without the legal services sector concentrated mostly in Center City. We are a regional, economic powerhouse," the Chancellor explained. "The jobs that these law firms bring to our city are good jobs. The ancillary businesses that these law firms support are good businesses."

The Chancellor said that without the legal services sector "Center City as it exists today would be totally unrecognizable. Whole parts of it might be deserted, blighted, barren." He told the members of Council "that we want to see our city continue to grow and prosper. We want to work with the city government and with City Council to continue to bring good jobs and solid businesses to the city. We can start with the change that I have recommended today," the Chancellor concluded.

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