Mayor Proposes Sane and Humane Budget. City Council Does What?

We will have more on the budget tomorrow. But for now, even while acknowledging that the sales tax is regressive, this is pretty good news, to put it mildly (from a City Hall press release):

“Throughout this budget process the citizens have spoken loud and clear – you want us to do our best to protect the most vulnerable among us,” said Mayor Nutter. “My budget will do just that.”

Mayor Nutter announced that his proposed budget will include no reductions in funding for the Free Library, no reduction in programming for the Recreation Department, no cuts in emergency or transitional housing for the homeless, and no closures of community health centers.

  • All libraries will remain open
  • All recreation facilities will remain open with no reduction in operating hours
  • All eight community health centers will remain open
  • All 3,390 after school slots will be retained (subject to the after school funding in the final State budget)
  • All services for abused and neglected children – and children at risk of entry into the child welfare and juvenile justice systems will be preserved
  • All emergency and transitional housing beds will be maintained and the City’s commitment to the Mayor’s Homeless Strategy, providing 700 additional slots for the homeless, will continue

Mayor Nutter also announced that – due to increased City support and the support of the Splash Fund - 46 outdoor pools will be open this summer - a commitment of 36 more pools than were included in the November Rebalancing Plan. In addition we will open 4 indoor pools, not the 2 originally planned.

The library disaster has ended. The Rec Centers will be staying open. And a lot of city pools will be opening, too. And plans to alleviate homelessness continue. (The only obvious stick in this is a plan to make people pay fees at health centers, which could result in less people getting health care. I would to hear more about what exactly the City is planning there.)

I want to talk more about the mix of taxes we choose, too. But, let's be clear: Generally, the Mayor is choosing sanity and humanity. If City Council wants to figure out alternative revenue streams, as I really hope they do, that is their prerogative. But, this is a really good baseline to start from: protect essential services.

Agreed: Enhanced revenue = service stability

The trick is to raise the money in a way that protects those with the least ability to pay. Sales tax may be popular, but it's strictly regressive. Moving to property tax with new assessments is going to be tricky. Folks are not happy about it.

The Mayor at least has a workable plan; we'll see what the sausage making process gives us.

Joshua Vincent
www.urbantools.org
www.ourcommonwealth.org
Phree Philly

Regressive but...

If there's a silver lining in the hike of the regressive sales tax, it's that the necessities - food and clothing - are exempt. Other than that, I agree with Joshua. It's unfortunate that the actual value initiative has been put off for so long because any attempts to fix valuation will necessarily have to be done at the same time as increases in revenue. If it had been done before, the revaluation could have at least attempted to be revenue neutral.

Actual Value Mystery

I too wonder why the administration didn't roll out the numbers. Why waste a crisis? The BRT's rep at a panel discussion I was on said the numbers are ready to go.

The advantage of bringing in actual value for this round of revenue enhancements would have been that an opaque system would have been far more transparent. The disadvantage is that actual value counts as (and in fact is also) a revaluation.

When a revaluation is introduced, state law limits revenue windfalls. Perhaps that had something to do with the decision to raise rates, not bring in the new values and assessed-to-market ratios (the revenue windfall for government is limited to 10% increased revenue in the year of a reval).

The sales tax is not all-encompassing in Pennsylvania, so yes, the impact is nowhere near as bad as most of the Southern States, so that is a blessing for working families. Yet, when I spoke at a Philly civic a couple of weeks ago, many folks said they bought their big appliances in Delaware. ;)

Joshua Vincent
www.urbantools.org
www.ourcommonwealth.org
Phree Philly

Why Not Progressive Taxes

I agree we should be pleased about preserving services. The folks in the Library Coalition and the Coalition for Essential Services have much to be proud of because this is largely the result of their activism.

But the imposition of regressive tax increases when other options are available, is not a minor matter. In particular, the current budget offers a fantastic opportunity to turn around the mystification around the supposedly "job-killing" Business Privilege Tax. We now know that much of the gross receipts portion of this tax is paid by businesses not located in Philadelphia, many of them probably employing few, if any, Philadelphia workers. But the Administration won't tell us how much tax comes from non-Philadelphia sources, although I have it on good authority that the numbers are perfectly computable. My default response to people who refuse to divulge information is that if revealed, it would be against their self-interest.

It is against Mayor Nutter's self-interest to let the cat out of the bag on who pays this tax because his biggest backers among the City elites backed him to get the BPT repealed.

Some information was given to Councilwoman Sanchez last year on who pays the gross receipts tax and it appears that about 85% of it comes from businesses -- located both within and without the City -- with sales in the City exceeding $500,000. There are legal ways of excluding $500,000 from the tax, thus exempting almost all small businesses and sharply cutting the tax for mid-sized ones. We could do that, plus roll back recent GRT rate cuts -- not increase them, just roll them back -- and still take in tens of millions of dollars.

Let's demand that the Administration give us the facts, instead of platitudes about the BPT. And let's shift the tax burden to those who can pay, and to those businesses who can't threaten to leave the City because . . . they're already not here.

More on when "regressive taxes" are not necessarily regressive

From this article in the NYT:

...Also in 2004, California voters approved a 1 percent income tax surcharge on personal income over $1 million, and Silicon Valley and Beverly Hills appear to remain well populated with the wealthy. From 2004 to 2007, according to a study by the California Budget Project, a left-leaning research organization, the number of millionaire taxpayers rose by close to 50 percent, well outpacing the 8.6 percent growth in the total number of those paying personal income tax.

“It is one of the oft-cited urban legends in California politics — that the rich are leaving California because of higher taxes,” said Jean M. Ross, the project’s executive director.

Between 2003 and 2005, after the Sept. 11 attacks, New York State imposed a temporary surcharge on incomes of more than $100,000, as did New York City. While the city did lose residents at all income levels in 2005, according to a 2007 study of population data published by the city comptroller, William C. Thompson Jr., households with incomes of $250,000 and higher were the least likely to leave.

Just as a the regressivness of an income tax can be mitigated, and as the regressivness of a wage tax can be mitigated, so can the regressivness of a business tax. Stan, your focus on dismantling the "progressive" but misguided, pro-big business, and pro-fatcat bias of the Nutter administration's policies is much appreciated.

Let's demand that the

Let's demand that the Administration give us the facts, instead of platitudes about the BPT.

I get that you've had policy disagreements in the past but it does seem as if this demand for transparency may well be at least slightly relevant to my disclosure below.

-DeWitt

____________________________________________________
Disclosure: Mandel for Controller, Campaign Manager.

I'm not sure about sane and humane

In the midst of this economic crisis, it becomes more important than ever for leadership to lay down the baseline promises of government. I know that I wanted a Mayor who had a sense of what essential services are in this city, who had a zeal for tackling a city system often seen as corrupt and ineffective; and who recognized the crippling impact of poverty and the need for focusing efforts on improving city schools.

But this go-around on the budget doesn't quite feel like that. It feels more like OK, you want tax hikes and protection of city services? Here's your 19% property tax jump - borne heavily by those anti-tax abatement complainers - and your sales tax hike - by the way let's not forget this budget also relies on major union concessions as well - and then you don't get your essentials cut.

But it doesn't tackle what people noted above which is that the Mayor chose regressive taxes, refused to combine the property tax hike with a reform of the messed up property tax system, and refused to investigate any reasonable analysis or sharing of the BPT burden.

And there's also this place in between service cuts and tax hikes called cleaning up government and ending a number of these political entitlements which have become political legacies. We won't milk billions out of it, but we can certainly get more than we've gotten and it would sure feel a lot better than the Mayor complaining about organized activists or making a silent majority appeal.

In the case of the Parking Authority, I know for certain that the money received from the PPA this year - $31 million for the city, a mere $900K for the School District (they gave $2.2 million last year and promised that number would increase annually) - came even despite not having an audit that we think could have delivered millions more to the city and our schools and potentially avoided the need for the crazy meter and parking ticket rates currently being imposed on people.

I disagree with the specific

I disagree with the specific tax choices he is making, for reasons I will go into more soon. And, if I were Mayor, I wouldn't do it.

But at the same time, we elected Michael Nutter, the guy who made his career about cutting the BPT and wage tax. After freezing their declines, I just think it is unrealistic for him not to look elsewhere at other taxes. For better or for worse, whether you agree with him or not, we kind of knew what we were getting on that front when he was elected.

On the Union stuff, I agree with you, it seems harsh. The first thing I want to know is how much we save by consolidating the health plan. I am about as pro-union as a non-union member can be, but I think if they resist that, they will get zero public support. In a time of deep recession and service cuts and tax hikes, I can't the public being receptive to it.

But, I mean, overall, given where we came from, and given the amount of shit he still will get for raising taxes at all, I do consider this sanity.

It's not about Michael Nutter

and what we should or should not have expected from him. It's about what's right. And that's what progressives ought to be talking about whoever may happen to be in office. I'll give Nutter credit for recognizing that services can't be cut. But I'd like to give him even more credit for getting the revenue raising right. People who get hit with regressive taxes don't necessarily see the issue as whether or not they justify or don't justify the City's election of Nutter. They see the issue as them paying unfairly, in amounts they can't afford, to keep functioning a City that belongs to all of us. And they shouldn't have to. Period.

I don't think it is that

I don't think it is that simple. I agree with you, for example, that we should rescind the BPT cuts and tax more progressively. There was, however, very little support for the bpt stuff at the forums. We can chalk that up to a good public relations campaign over a number of years, but, it still exists. So, there is work to do on actually convincing the public, let alone a Mayor who made his career on it.

I think the wage tax should just be rolled back, as you too (I think) have mentioned. Of course, that is not particularly more progressive than the property tax. They both aren't very good.

At any rate, the ball is in Council's court. So, tes, keep talking about it, by all means, and let's see if we can get council to vote on a better set of revenue raisers. That doesn't mean that, given where we were two months ago, this budget was not a big step forward.

I agree it's a big step forward, but

I don't think we get ahead by lowering our expectations. In any event, Nutter's budget is not a big step forward compared to where we were a year ago, and again, whatever our expectations, we should not fight less hard for progressive goals. Otherwise we get killed by a thousand cuts instead of a shot to the head.

Certainly the BPT fight is uphill. But I actually think that on that we are ahead of where we were a year ago. Of the few Penn-Praxis groups that considered BPT increases, I don't believe any were dead set against it. And I think the word is creeping out that you can roll back recent cuts in the gross receipts tax and hurt very few, if any, local businesses, especially small ones.

There's a very practical level too, why we need to keep talking the talk on BPT. And that's because Nutter's plan depends on legislative approval which is no sure thing. And if he doesn't get it, as things now stand, it's either rolling back BPT cuts, and/or wage tax cuts, or accepting Nutter's first alternative choice. And that's service cuts, and that takes us right back to our lowered expectations.

This fight is not over, no matter how much we'd like to claim victory and just move on.

I hear you Dan

I think we should acknowledge the compromise. It's just that I'm not so sure about the use of rhetoric and the economic crisis of late and the manipulation of perceived threats (30% cuts in services) to force folks to back off or dismiss conscientious citizens as "screaming masses".

A conspiracy theory about actual valuation

Nutter drew a lot of support from urban professionals living in neighborhoods that have been on the rebound or better not just very recently but for a number of years - the "safe bet" gentrifiers, as opposed to the "what are you crazy" gentrifiers, as it were. In the complicated ethnic chess board of citywide electoral politics this demographic was something of both an untapped resource and a key "swing vote" and Nutter running as a "reform" candidate did very, very well in tapping into this particular demographic.

The way property tax assessments are out of whack in Philadelphia is both arbitrary and bizarre to a certain degree, with individual homeowners in nearly identical row homes on the same block sometimes paying twice what their very nearby neighbors do. However, the general trend is that folks who own in basically stable neighborhoods or neighborhoods with a steady slow decline are overassessed comparatively and paying proportionally too much and people who are in neighborhoods that have seen big improvements both very recently and over the last decade or so are often dramatically underassessed. The early, "what are you crazy" gentrifiers, I think, are less likely to grumble about seeing a bump from being taxed on the actual value of their homes because they have seen and appreciated the increase in values they got by being ahead of the herd when the neighborhood recently got better. But the more late-comer, "safe bet" gentrifiers both paid the inflated value of the improved neighborhood's new prestige and then would be asked to pay taxes on that inflated value as well and they resent it.

Of course, proportionally, the "safe bet" gentrifiers also represent a lot of the folks who get the 10-year abatement but still more don't than do - the abatement being something of a hassle for any rehabber who isn't working on the big loft-conversion, whole-block-at-a-time scale.

Nutter is worried about this demographic politically and the reason is he is raising property taxes temporarily before fixing them to make them equitable is that it will make actual value assessments an easier sell to the "safe bet" gentrifiers. They will see their taxes go up for two years in the recession but also not want to take a loss on their inflated "late to the party" home purchase during those recession years while the market is down and therefore sit tight. When the recession eases and property tax rates go down, the "safe bet" gentrifiers will not notice as much when their taxes don't go down as much (or at all) as compared to folks in less newly upscale areas.

Also raising the bad rates gives the case for fair assessments a chance to build political momentum because Philadelphians are notoriously averse to changes in how "things have always been" - even if that "bad old way" hurts their bottom line.

To the wider question, overall, I would rather see Plan A - a mix of short term tax (even with some regressive ones) increases and some serious cuts - than Plan B where the whole massive shortfall is made up by dire, appocalyptic slashing of essential services. I understand people's complaints about the sales tax but still this most recent incrnation of Nutter I like a lot more than the one we were seeing back in Nov. and Dec. Its not great but its not what a lot of Philadlephians sadly call for - which is basically "slash services to all those who don't look like I do or make what I do because somehow (typically the reasoning gets a little shady here) those other people are responsible for the problem".

Now if we can all agree to put pressure on the row offices, because those are small but significant pockets of waste that underserve Philadelphians poor, rich and middle alike. In fact they only people they serve well are parts of the old-guard of ward leaders, much to the detriment of everyone else.

-Sean
MrLuigi, my cat, actually only types half as badly as I do.

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