Keep My Taxes the Same! Save the City!

So I see that my red-diaper baby friend, Mr. Murphy, wants to raise my taxes. Typical! I guess I can volunteer for that, especially because as a full-time student living off the fat of Mr. and Mrs. Stafford, I don't pay any taxes anyway. So raise them, suckers! (But when September comes, and I find a job and everything, I will need you to lower them again. Thanks.)

Anyway, I want to talk about the ridiculous notion that most Philadelphians are, as Elmer Smith said today, being asked to sacrifice for all of this mess.

The news, as you've heard by now, is bad. The short version is that you will pay slightly more for significantly less.

But Michael Nutter rattled off the details with that same deadpan delivery he uses to convey every other data bit he shares with the press or public. You can't beat this guy for bearing ominous tidings.

You want the guy who brings the bad news to be cool. You want it straight, no chaser. But you don't want the guy who has to get us through it to look like his pants are on fire.


Nutter's five-year budget-gap projections swelled from $450 million in September to $850 million a month ago to what now looks like $1.35 billion.


It's bad, maybe worse than we know. But Barack Obama and Michael Nutter are as cool as the other side of the pillow. They look like they know what they're doing, and the importance of that is not just a matter of appearances.

Both of them are asking us to make sacrifices. Obama in campaign stops even before he was elected was calling on Americans to "return to a spirit of service, responsibility and sacrifice.

My library isn't being cut. My street was never plowed anyway. I don't have children who won't have a place to swim in the 100 degree summer. And, I am not being laid-off. Life is grand.

Except for the fact that I believe that as a community we have a shared responsibility, and that we are killing ourselves in the long term with these cuts, I am not really being asked to sacrifice. And for most middle-class people out there, you aren't being asked to sacrifice, either. In fact, in the spirit of a wonderful man I know and love, you are being told that in this ever-growing crisis, you will get a wage tax cut.

Yes, in the time of less police coverage, shut down libraries and layoffs, Philadelphians are about to get a tax cut.

Here is the reality: Courtesy of the state, everyone who pays wage taxes in the city will be getting cuts next year, to the tune of about 100 million dollars. (Consider it a gift from the grandma who is spending her social security check at the Casino in Chester, with a couple cents trickling back to you. It also is coming, regardless of what happens with Foxwoods and Sugarhouse.)

So, even believing that the deficit is one billion dollars, which I question, and even believing that there are not much better ways to save the City money, which I don't believe, the City could instantly cut half of the deficit by simply saying that they were going to- temporarily or permanently- raise wage taxes by the same amount the Casino revenues will drop them by.

In the first year, that is $100 million dollars into the kitty. By simply paying the same wage taxes we do now, rather than taking a cut, we can immediately cut half off of the deficit. I think it is very plausible that with savings, with some help from the Feds, etc., the libraries and the parks and the pools can stay open.

For all the tax people out there, I would even say we can make them temporary. But, really, it seems silly to say that as we shutter the doors of our libraries and lay off workers at Fairmount Park, what Philadelphians really need is a tax cut.

So why don't we start there and, combined with a look at where we as a City truly waste money, see where it gets us.

Keep taxes the same. Save the City.

If you don't learn from the past, you're damned to repeat it.

Leaving aside the issue of ta increases and the freezing of tax cuts for a moment, we have to remember that we've been here before. I seem to recall a time in the early 1990's when a guy named Ed Rendell became mayor and the City was near bankrputcy. At the time, the nation was in the midst of a recession.

Since 1991 we have learned little. We still do not budget for contigencies.

It is time to start. It is time to establish a Rainy Day Fund for the City of Philadelphia. We've had a decade of budget surpluses, but because of either the Home Rule Charter or a faulty interpretation of it, City Council has consistently passed a balanced budget with no funds going to cover economic risk. Some members, like Councilman Kenney have advocated for a RDF in the past.

We may have nothing to pay into it now, but it's time we learn our lesson for the next decade of surpluses and the next recession.

Here's the Answer: Organize

Here's my view:

1) Although the balance sheet needs to be reviewed carefully, I think the crisis is very real. There's no way this Mayor would suggest freezing business tax cuts otherwise. It may just be a feint, as has been suggested, in order to allow services and spending to be cut, thus reopening the door to BPT cuts fairly soon, but I doubt Nutter wants to run for re-election against a background of lousy services due to lower business taxes.

2) We need to force the powers that be who want lower business taxes to get them paid for through increased state and federal aid, both of which are at unconscionably low levels after 8 years of Bush. So we should advocate phased-in increases of the BPT. This would be the mirror image of the phased-in cuts that Council enacted in tax cut lala land last year. Increases would go into effect every year for the next 5 years until they reached the level of 5 years ago. We've been assured over and over again that "gradual" reductions in business taxes would be painless because they would be easily absorbed. We should say the same thing about increases. If it turns out they're not, the Chamber should be in Harrisburg every day demanding that the Legislature enact revenue sharing for cities to enable them to function. Then we can restore services to where they should be and suspend the BPT increases.

3) This is really #1. We desperately need to organize ourselves into a political force with clout. We have some clout as pointy-headed intellectuals with computers. But it's not enough. In the blog I posted yesterday I urged people to come to the Neighborhood Networks town hall event on November 17. It's going to be all about organizing in every neighborhood, just as we finished doing for a certain candidate. But that candidate, even if he can truly walk on water, cannot accomplish what we need for cities without lots of pressure from below. On November 17, after we've heard from some very good and inspiring talkers, we're going to break into small neighborhood groups and talk about the nitty gritty of organizing and staying organized under the citywide umbrella of Neighborhood Networks. When we develop enough neighborhood groups under that umbrella, we will have the ears of every city, state and federal elected official in the City. And that voice will filter up and out. On the other hand, if we don't dedicate ourselves to being organizers in every neighborhood in which we live, we will be patronized and largely ignored.

We're talking about major challenges to conventional thinking here, the conventional thinking that says, essentially, it is OK for cities to drop dead. Just not too visibly or too quickly. It's an entrenched though unspoken corollary of the notion that all that really matters are the interests of investors. If we want to turn that around, we'd better start speaking out for ourselves, not in the dozens, but in the thousands.

NN's town hall will be on Monday, November 17, at First Unitarian Church, 2125 Chestnut Street, from 7-9 PM. I hope lots of you are there, and that you each bring some of your neighbors.


we can quadruple the BPT rates right now so they are more than they were 5 years ago, but with business activity falling off a cliff, the receipts will not make up for the existing losses.

IIRC the majority of our tax receipts come from the Wage Tax, not BPT. If we could increase the number of available jobs in Philadelphia County--we could collect a lot more money in Wage Tax receipts than we could extract from GPT and NPT put together.

Employers do not care about Wage Taxes, as those costs are carried by the employee. The employer can offer the same salary for an in-city employee as well as an out of city employee and the total cost is the same... just the money gets directed to the city in the case of the in-city worker.

Businesses are much more sensitive about the BPT which reduces margin and forces businesses to raise prices to recover the loss (except the Gross Receipts Tax, which increases on that tax mimic a logarithmic recovery rate).

There might be some better ways to encourage business growth in Philadelphia and also tax progressively instead of flat.

How about offering a Business Privilege Tax rebate for employers who increase the number of positions in Philadelphia as opposed to other cities?

How about offering a LOWER BPT rate for businesses who incorporate in Philadelphia and use the standard rate on businesses who only maintain branch locations here?

How about the City embark on banning the use of contractors who outsource work overseas--or at least demoting them for consideration for hire, and elevate them for consideration if they use local employees?

Not totally serious about my list

The real point of my post was twofold: one we need to send a message to the powers that be, who happen to mostly be in the big business class, that they need to help us in Harrisburg and Washington to bring money to this shortchanged city. Fortunately, based on his press conference yesterday, the President-to-be, already gets it. But we can't necessarily wait until January 20, or assume he can deliver without pressure from below. Second, we need to get organized. We do a good job of intellectualizing on this site, and it's great that it's here. To be clear, I love this site.

But we need to get our asses in gear. The City is not that far from collapse. And we just experienced a planet-changing example of how we can organize in every neighborhood of the City and be incredibly effective. So I want everyone reading this to come to Neighborhood Networks November 17 conference where we will focus on keeping that organizing focus alive permanently as a force in City life and politics. I will be posting a flyer with more details soon about the conference and you can also read my blog about it. But in short, it will be at the First Unitarian Church, 2125 Chestnut Street, and there will be music, snacks and a lot of focus on organizing like crazy.

But getting back to what we should do on taxes. First my BPT suggestion is not entirely tongue in cheek. Sure, increasing the rate would not raise all the money we need to get back on our feet. But people need to know that it's not a tax that's confined to Philadelphia businesses. The gross receipts tax is paid by ALL businesses that conduct sales in the City. Coors and Sony pay the gross receipts tax, and there's reason to think that about half of it is paid by businesses that have nothing to do with us except selling to us. So abolishing the tax actually gives those out of towners a windfall. Raising it makes them pay more.

However we're in a tax freeze state, so we really ought to use the time to think things through from scratch. Marc Stier has suggested we develop an income tax and a graduated business tax. We should restructure the business tax to make it more progressive, and to use it to incentivize -- has that become a word? -- socially useful activities like moving good jobs here. But all of that takes time and help from the State. Here's the question, how do we get their attention?

On the subject of IIncome Taxes

This is about the only time you'll see some co-operation from me on this one.

I think it's unfair that the City of Philadelphia completely ignores Dividends and Capital Gains, but instead focuses on the Wages earned by entrepreneurs, janitors, buildings trades, and the like for the lion's share of the City Income.

But this is a slippery idea. If we abolish the Wage Tax and replace it with a progressive Income Tax like New York City has---you will create mass confusion with the public as we will then have to file THREE tax returns like Manhattanites do. Sure, our tax forms will be similar to New York's and it's not hard for a computer to figure them--but think of all those low-income folks who do work, WILL have local withholding, and need to file to get that withholding back.

Lots of paperwork, computer software, and more people at the Revenue Department to handle the crush of bureaucracy that an Income Tax creates. The costs of implementing the Tax might outweigh the benefit of passing it for years. As it stands now, most of the Wage Tax receipts come out automatically through payroll processors like PayChex and ADP. In this new format, you still have the employer complexity (it changes from a remittance to a withholding), and you add a new reporting burden on the citizens. I'm just saying--this won't pass easily.

I think an easier fiscal change that we can do right NOW is start a Rainy Day Fund. Complete with its own Fund Manager and made immune to City politics. The position must be appointed by the mayor and confirmed through City Council by majority and the City should hold a Charter Change ballot question to divert X% of gross receipts into the RDF on a permanent ongoing basis.

The RDF Manager will not withdraw a penny of the funds unless all of the following happens:

- The Mayor proposes a withdrawal from the Fund and publishes notice of that action a month before it is due to occur
- The Fund Manager concurs
- An Act must pass through City Council UNANIMOUSLY authorizing the withdrawal.

What should the RDF invest in?

Primarily, City Bond issue. The Rainy Day Fund should be charged with buying up any municipal, waterworks, school and gas company paper put to issue where it can--so that way more of our debt principal stays in Philadelphia, and the interest the City and its citizens pay in taxes and in our utility bills stays within the City to help grow our equity in Philadelphia.

The less money in principal and interest payments going to unknown outsiders--the more capital we will have in Philadelphia to grow our city, invest in infrastructure and do wise things.

Don't you agree, Stan? If you do... could you help me communicate that idea to our City Council?

No need for another form for a city income tax

As the state does for other cities, it could simply collect the city income tax for us. We would just have to fill out the one state income tax form. Collection costs for the city would be minimal.

Fight The Cutbacks

There will be a rally Sunday November 9, 2008, to keep open the Roxborough Firehouse. The rally will be at 2:00pm at the firehouse at Ridge & Cinnamonson Streets

Middle class

"And for most middle-class people out there, you aren't being asked to sacrifice, either."

That's because high taxes and crumby schools/services have chased out so many middle class residents of this city. All the private-sector jobs are in the 'burbs, so there is not much incentive to stay.


Dan, can I interview you for a college blog project?

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