- Pennsylvania Among 'Terrible 10' Most Regressive Tax States
- February 4 Non-Partisan Training: HOW TO RUN FOR ELECTION BOARD IN 2013: HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Republican Governors Opt-In to Medicaid Expansion
- The Reports of Unions' Death Are Greatly Exaggerated
- Ask Allyson Schwartz to run for Governor
- Mind the gap: Opting Out of Medicaid Expansion Leaves Low-income Families Behind
- Jan. 14 Workshop:HOW TO RUN FOR ELECTION BOARD IN 2013; HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Seth Williams on Guns, Jasmine Rivera on School Closures @PFC Meetup Wednesday
- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
- What to Make of the Fiscal Cliff Deal?
The Budget Issue is Not about Nutter, it's about Nutter's Choices
I've been wrestling with the Mayor's new budget for a few days now. One thing I've figured out; it's not right to think about it in terms of what should reasonably be expected from Michael Nutter. In that framework I might be relatively pleased; when he was a Council member he worked hard to abolish the Business Privilege Tax in toto; now he proposes abolishing "only" the Gross Receipts part. Furthermore, he proposes to cut the rate of the Net Income portion of the BPT just 7%. Neither the Gross Receipts abolition, nor the Net Income cut is immediate; they would both be phased in over a period of years. And Nutter is also proposing an immediate 25% increase in the Parking Tax -- a relatively progressive tax -- which will make up a substantial part of the lost BPT revenue.
So as someone who thinks cutting business taxes should be a very low priority, if one at all, I could feel OK about all this compared to what might have been.
But personalizing the budget proposal is the wrong approach. The important question is not how to grade Nutter. The important question is this: are the choices the Mayor made in the budget the right ones for our City? My answer to that has got to be no.
Government exists, to me, primarily for the purpose of advancing justice. Its main purpose is not, as Nutter said several times during his budget address, to provide good "services" to the City government's "customers". City government is not a business. It is the exercise of power by its citizens, acting through elected officials, to advance the common and just good. Without government you've got the strong, the weak and uncontrolled capitalism. And that means the weak get ground down into very small pieces. Government is supposed to prevent that.
Of course, good services are important, but they are grounded in social justice as well. Public safety, decent education, clean and safe streets, fire protection, good drinking water, good health, decent housing; these ought to be available to all, not just to those who can pay for them. Without good government these services would exist, but they'd all be available only to the super-rich.
From a social justice perspective this budget is more than a little disappointing. For instance, buried in the Five Year Plan is Nutter's proposal to abolish a low income wage tax credit that doesn't even take effect until 2013 -- and then only in part. There is almost no budgetary reason even suggested for abolition of this credit. The only number that is offered as a rationale is $80.8 million, the amount that the credit would allegedly cost the city in FY 2016, which can only be categorized as a wild guess. No, the proposal is not about balancing budgets. It's about the wrong choice of whom the City needs to look out for.
The Mayor was presented with a choice between accelerating business tax cuts or retaining the one tax cut on the books that's targeted toward those who need help. The choice he made is to increase inequity by following the false siren song whose lyric tells us that economic growth comes mainly by feeding the rich.
This is a Republican siren song, of course, that we hear daily from Washington and Harrisburg, one that Democrats succumb to at their peril. Because they will always be outpromised on tax cuts for those who don't need them. Nevertheless, this budget embraces the Republican notion that cutting taxes for rich businesses as well as not so rich, eventually helps workers and the poor. And eventually is good enough.
The Administration's embrace of that logic is revealed in another tax choice as well, the one that tells us who will bear the growing burden of taxes until "eventually" comes around.
Look at the small print in the Five Year Plan and you'll note that real estate tax revenue is slated to grow 23% over the next five years. Two thirds of the City's real estate tax is paid by residents, and as we know, a tremendous number of those residents are poor or near poor. They will pay the tax increase whether they rent their homes or own them.
This tax increase will be a stealth tax increase. The Mayor is not announcing it, and City Council is not voting on it. Instead the budget assumes that it will come from the widely touted "equalization" of real estate values that the Board of Revision of Taxes intends to conduct soon. But "equalization" -- a nice sounding tax increase euphemism -- will fall regressively. Yes, some rich owners, maybe even Vince Fumo, will pay more. But most real estate taxpayers are not in Vince's income class. They will get hit hard, especially if they're getting gentrified, as so many are.
Now maybe I'm reacting in too knee-jerk a way. Maybe cutting the BPT and increasing reliance on the real estate tax is good for economic growth, and ultimately, therefore, really does help everyone. The Administration doesn't really seem to think so, however, because the Five Year Plan forecasts that BPT Revenue will start shrinking in FY 2011, and by 2013 will raise $15 million less than it's bringing in this year. And it forecasts that wage tax growth will decline from a 15.4% increase over the past 4 years, to a mere 7.5% increase over the next 5 years.
Personally, I think the tax policy that would be best for economic growth in Philadelphia is that which would put money in the hands of people who would spend it in Philadelphia, namely poor and working class people. And there's research to support that notion. But no one knows for sure; it's all about economic theory which wise people debate endlessly. So that brings us back to choices: how can a just government act on a guess the immediate consequence of which is to increase injustice? That is what cutting the low wage tax credit, and increasing real estate taxes will do. That's not the just choice, regardless of who sits in the Mayor's chair.
Here's a little more about choices. The budget makes some good ones in proposing increased spending on housing, Community College, health centers, housing, and reduction of youth violence. But instead of ending the gross receipts tax -- which now brings in $100 million a year -- a choice could be made to spend that amount to further fund those humane choices. Or the money could be given to the School District to meet its huge unfunded liability toward educating our young. Or the tax cut could be trimmed and targeted toward truly struggling neighborhood businesses.
Making that funding choice, or a progressive tax cut choice, would not guarantee economic growth. What we do know is that either of them would directly improve the lives of many of our residents now struggling for a future. While we're guessing about economic theory, how can we not opt for the path that advances justice?