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3 Myths About Philadelphia’s ‘Blogging Tax’

The Philadelphia Inquirer-Daily News Building ...

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Myth #1: The blogging tax is unique to Philadelphia.

Many cities have local taxes on wages, income, business revenue, and gross receipts. New York City charges a commercial rent tax, a general corporation tax, and an unincorporated business tax, which would probably fall on any income-generating blog or other website. New York, however, exempts the first $3400 of tax liability. (Technically, they provide a credit.) Philadelphia doesn’t, which is why we have the specter of bloggers being billed upwards of $300 for earnings less than $20. New York also has a website that’s easy to understand. Do you know what your city’s tax policy is?

Myth #2: This is just about business revenue.

Cities can easily make exemptions not just for the amount of money earned, but for the kind of activity as well. Philadelphia has a sales tax exemption for clothing, to encourage commuters and residents to shop in-town. As NYU journalism professor Jay Rosen told “In New York City, the law says if you’re a street vendor you have to get a license, which costs money, but there’s an exception if you’re selling books.  No license needed. That would be a smart thing for Philly to do with bloggers who have small incomes. A First Amendment exception.”

Bloggers who pay business taxes have the same responsibilities to the government as newspapers or other established media outlets, without always receiving the same journalistic courtesies and protections under the law. Newspaper chains can also take advantage of a common tactic to large businesses, arranging their books so that none of their profits (but most of their overhead) falls under the jurisdiction of a municipal tax. Sole-proprietor resident-bloggers can’t do that.

The city’s largest paper, the Philadelphia Inquirer, was remarkably dismissive of the bloggers’ position, more concerned that the city had been made “the subject of head-scratching and ridicule”:

On BuzzFeed, a popular website for stories, photos, and video competing to go viral, “Philadelphia Blogger’s License: $300″ was in the running, in between videos of a bored cat having a birthday party and Lady Gaga dancing at a Kiss concert…

Well, some bloggers who make a few dollars from Web ads were informed recently that they had to obtain a license. Not because they were bloggers, the city says. But because they made money.

Something about small-time bloggers getting hit up for money by the government got a lot of blog writers and readers fired up.

Actually, most of us were fired up about the cat’s birthday party. Getting threatened with lawsuits and debt collectors raises a lot of emotions, but “fired up” isn’t one of them.

There’s another first amendment issue at work here. Because cities have tremendous latitude as to how far to go in pursuing a blogger’s taxes — offering amnesty for some, lawsuits for others — they can potentially use revenue collection as a means to punish dissenting, unfriendly, or unconnected voices. Philadelphia isn’t the only American city with a long history of selective taxation and enforcement, favors to friends, or pay-to-play.

Myth #3: Philadelphia is collecting this tax because they’re strapped for cash.

Now, let me be clear: the city, like many other local governments, is absolutely facing shortfalls, partly from the economic crisis, mostly from long-term problems in the city’s budget. They’re charging businesses for trash collection, which always fell under property tax before. The water department is charging property owners with a special fee for water collected in the city’s storm drains. The revenue department has been nothing if not innovative.

But the city isn’t pursuing this tax because of the money. They’re doing it because, like many other governments, their tax structures haven’t kept pace with a changing economy, and the political and bureaucratic structures have been unable to do anything about that apart from tinker around the edges.

Last year, the local City Paper (the same one who initially broadcast the blogging tax to the world) highlighted a new Philadelphia institution called Independents Hall. Just a few blocks from Independence Hall, it’s a co-working office for freelancers and folks who work outside the office: “designers, developers, writers, artists, entrepreneurs, scientists, educators, small business owners, telecommuters, marketers, videographers, game developers, and more.” For $275/month, you get  24/7 access, a dedicated desk, and a place to store your stuff. For less, you can get a day or a monthly part-time pass. Last year, memberships and reservations spiked:

It’s too early to know whether self-employment has been trending upward in Philly since the recession hit (between 2002 and 2005 — the last time data on entrepreneurship was collected — it rose from 13.5 percent to 15 percent). Meg Shope-Koppel, director of research at the Philadelphia Workforce Investment Board, says that “as recessions begin, some industries start using more contractual workers,” though “it’s not going to be a huge spike, because in some areas, businesses are failing.”

Most of the people at IndyHall knew about the BPT and had already paid their lifetime passes. They talk with each other about how to structure their finances so they don’t get walloped with a huge bill. They help each other set up LLCs and register their businesses as nonprofits (who are completely exempt from the tax).

They stick together. They have to. They’re the only ones who know. Nobody else knows anything.

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