August 24th, 2010

There Is No Philadelphia Blog Tax... Just A Philadelphia Everything Tax

Tom Boutell
Chief Software Architect
Philly does not have a special tax on bloggers. All the outrage about this is silly and overblown. So why am I still ticked off at the city? Because Philly has a tax code that punishes new businesses, period.

Many news outlets are carrying the story of the "Philly blog tax." This staff opinion piece in the Washington Examiner is typical. Bloggers are waking up to discover that the city demands they pay $300! Sarah Palin was right— the First Amendment is dead!

Except that's not what happened at all.

1. These bloggers were deriving a (very small) amount of income from ads. They signed up for that, provided bank account numbers so Google or whoever could pay them, the whole bit. They were very much aware they were trying to make money, successfully or not.

2.They reported that income to the IRS.

3. The IRS made that information available to the city and state authorities, and the city did what it did with everyone who operates a business in the city: they required the business owner to pay their one-time, lifetime $300 business license fee.

The city is not gunning for bloggers or even looking for blogs at all. They are just reading the information the IRS gives them.

Bloggers who are not trying to make money- bloggers who are not running ads for a cut of the profit- are not being required to pay $300. There is no free speech issue here.

You can certainly argue that the city shouldn't require a business license for entities that have not earned at least $100 in a given year. I would agree with you— $100 would be twice the city's alternative $50 annual fee for those who don't want to shell out $300 up front in the belief that their business will one day be viable. A $100 cutoff seems fair and sane.

You can also argue that local taxes are unnecessarily complicated, requiring small business owners to pay as much to accountants as they do to the local government because their tax software refuses to even consider handling every little municipality's crazy unique tax code. I would agree with you there too. State and local taxes on personal and business earnings should be percentages of your adjusted gross income, or the corporate equivalent. Nothing more complicated than that. (Property tax is another story entirely.)

But the city is not specifically going after bloggers. They are doing what they have always done to collect taxes on all business activities in Philly.

Two recent Inky stories got the facts right, but it's worth emphasizing the most important point: the city is responding to information from the IRS about people who reported business income to the feds but not to the city. That's it, and that's all. They have no idea which businesses are blogs. The underlying problem is that Philly punishes new businesses in general.
Tom Boutell
Chief Software Architect