Answering John Street's call for a tax plan, Republican mayoral candidate Sam Katz proposed a "Philadelphians First" program yesterday that would cut wage taxes 13 percent and dramatically change the way City Hall operates.

Katz's plan aims to reduce the wage tax for city residents from 4.61 percent to 4 percent - a measure that would equal the rate suburban residents pay.

The plan would trim $245.5 million from the projected $11.2 billion in city spending over four years. That amounts to a little more than 2 percent in overall cuts, he said. It is much less than the $500 million cut Democratic candidate Street has claimed would occur under Katz's plan.

Katz said Philadelphia - which has one of the highest tax burdens in the country - must become more efficient and less costly if it is to compete.

"High taxes are chasing businesses and residents out of Philadelphia and discouraging others from coming here," he said. "To turn this city around, we must give Philadelphians a better deal."

Katz would not specify where the budget cuts would occur.

The key to Katz's budget savings rests in a dramatic overhaul in the way city government works. Katz wants every department to implement a strategic plan with budget allocations linked to performance. City employees who help to meet the goals would share in the cost savings.

Street spokesman Ken Snyder said, "The numbers just don't add up." David L. Cohen, Mayor Rendell's former chief of staff and a Street supporter, called it "an embarrassing work product."

Independent economists, however, praised the plan.

Wharton professor Robert Inman, a leading city budget expert, said, "It looks like [Katz] is pursuing a strategy in a credible and honest way."

Another economist added, if anything, Katz's did not go far enough.

"This is anything but a radical idea," Dick Voith, an economist at the Federal Reserve Bank in Philadelphia said. "The world is becoming more competitive. Cities that can't compete will lose."

An unexpected wrinkle in Katz's plan, which was announced at a news conference, was leveling the rates that residents and nonresidents pay.

The current nonresident rate is 4.01 percent. The city's current five-year plan calls for reducing the nonresident rate to 3.88 percent by fiscal year 2004. Katz proposed that the nonresident rate be frozen at 4 percent, the same as his projected city rate. That is sure to raise the ire of suburbanites and their state legislators.

Nonresidents have paid reduced rates since 1983. This year, their contributions to the city treasury are estimated at $440.8 million, compared with the $719.1 million collected from residents.

Katz said nonresidents should pay the same rate as city residents since they enjoy many of the benefits, including shops, restaurants, theaters and sports.

By making the city and suburban wage rates the same, Katz said he hoped to eliminate one reason residents leave Philadelphia.

The city has lost about 150,000 residents in the 1990s, more than any other city in the country. Much of the loss has been attributed to high taxes.

Under Katz's plan, a person now earning $40,000 would save about $500 in taxes over four years.

Katz's 83-page plan was designed in part to counter the criticism Street has been directing at him. Street has been running TV ads saying Katz's plan would cut $500 million, forcing service and job cuts.

But Katz's plan only calls for $245 million in city revenue cuts.

"This calls into question Street's reputation as a budget expert," said Fred Siegel, an economic history professor at Cooper Union in New York, who is following the mayor's race here.

Snyder, the Street spokesman, challenged Katz to identify which departments and functions would be cut.

"Is he going to cut the police or fire budget?" Snyder wondered.

Katz said he will not make such decisions until he has all the information available.

"I realize that some people want to know exactly where each dollar will be saved," he said. "They want the name of a person or a program that will be cut. That's not the way it's done."

One area Katz did identify as needing closer scrutiny was the awarding of legal and professional services contracts. The city spends $1.3 billion a year on professional services and another $27 million on lawyers, he said.

"Surely, these costs can be reined in by subjecting more contracts to competition and ending unbridled pinstripe patronage," Katz said.