I want to add something to this tax policy discussion. I know I have said it time and time again, but I think it's important. I think BOTH Ben and Nutter are correct here. I do think lower business taxes will be helpful. At the same time, I also think that there are other issues employers look at when locating or relocating, e.g. public transit. I think a city is a package and should be competitive on every level.

That being said, I really do not know how practical a tax cut is, and I do not think anyone does. I think the city is in prime position for an economic/efficiency review. We need to know what comes in and if we are collecting it all. I have read about other cities and states who simply are not collecting all their taxes because they are just not aggressive enough. Once we know what is coming in, we then need to figure out what we spend. Thus we need to review salaries, job positions, purchasing and procurement, etc. I know for a fact the procurement system is flawed and cumbersome.

Only then can we truly determine if we can afford to reduce taxes at all, not just to the level that Nutter is talking about. Problem is no one is talking about a performance review. Why? Too many entrenched interests in City Hall and too much patronage. Nutter and Saidel are probably the only candidates who could credibly discuss such a review, based on their backgrounds. I hope they do.

Nice piece Ben.

I want to add something to this tax policy discussion. I know I have said it time and time again, but I think it's important. I think BOTH Ben and Nutter are correct here. I do think lower business taxes will be helpful. At the same time, I also think that there are other issues employers look at when locating or relocating, e.g. public transit. I think a city is a package and should be competitive on every level.

That being said, I really do not know how practical a tax cut is, and I do not think anyone does. I think the city is in prime position for an economic/efficiency review. We need to know what comes in and if we are collecting it all. I have read about other cities and states who simply are not collecting all their taxes because they are just not aggressive enough. Once we know what is coming in, we then need to figure out what we spend. Thus we need to review salaries, job positions, purchasing and procurement, etc. I know for a fact the procurement system is flawed and cumbersome.

Only then can we truly determine if we can afford to reduce taxes at all, not just to the level that Nutter is talking about. Problem is no one is talking about a performance review. Why? Too many entrenched interests in City Hall and too much patronage. Nutter and Saidel are probably the only candidates who could credibly discuss such a review, based on their backgrounds. I hope they do.

Nice piece Ben.

I thought your original Op/Ed piece was very well written and thoughtful.

I was dissapointed at Michael's response. Not because I dissagree with some of the underlying principles of his platform, but because I find the platform somewhat limited in scope.

I've talked to him about this issue and know him rather well. I am extremely fond of him on a personal level, but I do wish he (and any other candidate running for Mayor) would take a more holistic approach when building a plan to create jobs and make our city competitive in the regional (if not the national and global) economy.

Companies will be more likely to relocate here if our streets are safe for their employees to walk at night, if our transportation system allows for easy commutes, if our housing stock is good and varied, if city services are QUALITY customer services, if their employees can send their kids to great public schools, if there are social, civic, recreational and cultural attractions for their employees to take advantage of AND (in my opinion) if the tax structure were more fair -- and that does mean (to me) the elimination of the GROSS receipts tax for that business and responsible reductions in the tax burden of middle/working class wage earners and home owners.

It is beyond me why more mayoral candidiates just can't SAY that it's a comprehensive formula of a variety of things that will create jobs-- not just tax cuts.

And one other, but very important point -- small businesses in Philadelphia are reposnsible for a majority of the jobs in Philadelphia.

I come from a small busness backgroud. I was born, raised and trained in small business. My version of bold tax reform drastically cuts the business privledge tax (on gross and net receipts) for small businesses, as they are defined by national standards.

Comcast and Verizon and Blue Cross have a ton of people in their corner in City Hall and in Harrisburg and SHOULD pay full net receipts tax.

But what about the Shoe Barrel or Fante's or Blendo? They need help much more than those huge corproations. They're the people who keep this city running and the economy afloat -- not Susanne Roberts and her son.

I really hope all mayoral candidates will see a legitimate reason to differentiate between the two.

Unfortuantely, we've got a cadre of trickle-down democrats in this town who think all we have to do is cut taxes, and we become the land of milk and honey. That scheme doesn't work. It hasn't worked in 30 years. Why they think it will work now is beyond me. I certainly haven't forgotten the Bush recession of 1990-1992 and neither should they.

The dynamic gives voters a clear choice, though: reactionary policies versus progressive policies.

Nutter left me totally unmoved in his piece. He should have whipped out some great example of a city that taxes helped turn around or something. There was not a single new soundbyte in there. No zingers.

Still on your side, Ben. We need the city to function again. Business can't get stuff out of town if the bridges over the Schuykill go out, you know?

---
BradyDale OnLine

Ben, I would recommend you read the results of the Philadelphia Tax Reform Commission's 2003 survey of the BPT and wage tax (if you have not done so already):
http://www.philadelphiataxreform.org/

You argue that Nutter has "absolutely no substantive proof that his proposed tax cuts will create new jobs." In this report you will find your substantive proof.

The theory is that cutting those taxes will bring in enough new jobs to make up for the lost revenue. It might take a couple years, but is there ever a better time to do this? We have a surplus of over $200 million this year.

Center City's streets are safe and will be even with cuts in the BPT and wage tax. I would argue that businesses are not deterred by our poor school system since their employees would have plenty of opportunities to find quality education in the suburbs - where a large portion of them will choose to live anyway.

Business is about economics, and making it more profitable to locate INSIDE the city will DEFINITELY bring more companies and jobs here. Southeastern PA is already an excellent region to live and work. The idea is to draw employment inside the city limits.

Center City's streets are safe and will be even with cuts in the BPT and wage tax.

Center City isn't enough. Surrounding neighborhoods have to be safe, not only to make getting to and from CC safe, but to allow businesses a range of places to consider locating -- if everything has to be downtown, rents will become prohibitive in no time, and large swaths of the city will still be underserved.

I would argue that businesses are not deterred by our poor school system since their employees would have plenty of opportunities to find quality education in the suburbs - where a large portion of them will choose to live anyway.

Again, a poor argument. You are presuming that somebody moves to Philadelphia for the new job, and thus locates in a premier school district (or takes advantage of private schools). What businesses look for is a pool of potential employees that is *deep* -- where they can imagine always having well-educated folks not only at the plummy executive level, but also in their accounting offices, answering their phones, and working their delivery bays. Those jobs need a reliable and trained/educated workforce, but they don't necessarily pay wages that allow employees to move to tony neighborhoods; instead, the system-wide level of education (and safety) have to be high enough that there will be appropriate candidates in the general region of the business. Right now, Philadelphia is failing so many of its neighborhoods that there aren't many places that a business could set itself down and start taking job applications.

You gotta stop looking through the narrow lens of elite businesses and employees, and think about the mom-n-pop corner stores that drive most of America's economy. They can't open where store or employee safety is in question, or where the workforce isn't prepared to staff their needs. That means a lot of work to be done throughout the city before a few % of taxes are making or breaking a location choice!

acm

I found Ben's piece a far better piece of rhetoric than Nutter's response but I'm not sure that a few paragraphs in a newspaper really capture the essence of the debate underlying arguments about tax reform. Our city’s economy needs to be transformed. Reforming, reorganizing—or however you want to characterize it—drastically changing how Philadelphia city government functions is a necessary next step to make Philadelphia a better place.

I thought there were flaws in the editorials--if I can oversimplify for a minute--between Ben's belief that tax reform is somehow inherently bad and in Nutter's case that it'll promote substantial economic growth.

Ben writes that “[s]uch a large tax cut will have a drastic impact on the city budget” without stating how large a cut Nutter proposes. Philadelphia’s annual budget is 1.2 billion dollars. If you can’t find a few tens of millions of dollars in inefficiencies, it means that you simply aren’t trying very hard.

Then Ben cites the revitalization of West Oaklane as an example of what happens when resources are committing to improving a neighborhood. The point of citing the revitalization is to suggest that similar tactics instead of tax reform could be applied throughout Philadelphia to improve our city. There is some truth to that I suppose. Yet, I'd actually ask, other than the physical improvements that are observable along Ogontz Avenue, what has been the affect of the investments. How many jobs have been created and how has neighborhood income levels changed? Creating jobs from the bottom up—because of the work of a CDC--is rare and practically unheard off. Nonprofits have a terrible record when it comes to economic development. Such criticism is unpopular with political leaders who like to pretend their pet CDC is changing the world. Generally speaking, this is no good data in similar neighborhoods across the country that suggests a few million dollars worth of social services and some streetscaping improvements substantially change the social and economic dynamics or prospects of a neighborhood. West Oaklane actually has a decent working and middle class so by no means am I suggesting that it’s not a decent place to live even if it could be improved.

While Nutter's embrace of tax cuts may not fundamentally transform Philadelphia’s economy by themselves, they'd send a clear message that the status quo as a place to do business is not acceptable. Many of Nutter's good government initiatives from the ethics bills to his work on the convention center are the types of policies that would enhance Philadelphia’s ability to compete. Enacting even small tax cuts would be a worthwhile beginning. What really matters, however, isn’t who can play BFF to big business or who can call out that the boogiemen are our to get the poor people but which Mayoral candidate can articulate a vision that offers something other than the status quo.

John Street funded NTI and has preserved lots of city jobs. What did the city get? … Half billion in addition debt and enormous pension liabilities for individuals the city employs. While Michael Nutter has flaws—and the property tax cap sounds like one—I personally think that all of the other candidates are basically offering to be Frank Rizzo-lite or Wilson Goode-lite—and Philadelphia deserves better. We don't need another average mayor.

Good work again, Ben. Here are just a few points responding to those of you who still agree with Nutter.

First: The so-called "Tax Reform Commission" should never be cited as a source validating the need for business tax cuts. The Commission was set up for the sole purpose of developing a business-oriented tax cut agenda, and its membership reflected that purpose. There was not one representative of labor, nor of grass-roots community groups on the Commission, except for Jonathan Stein of Community Legal Services. Stein dissented from the Commission's findings and has been one of the strongest campaigners against all of Nutter's business tax cut proposals.

Second: In Council's tax cut debates, Nutter sided completely with those who argued that we should not worry in the least about loss of services because of the supply side benefit of BPT cuts. Yet he ridiculed the suggestion of Lance Haver to condition the tax cutting to the production of revenue or jobs. Nutter's bottom line: just believe. No different than the rhetoric coming from every Republican mouth for the last quarter century.

Third: Nutter didn't call for minor BPT cuts. He proposed that the whole BPT be eliminated, completely, both on the gross receipts and net profits side. The tax would be gone, hook, line and sinker. That would have cost the city not ten or so million, but well over $300 million a year after full repeal, or 15% of all the tax revenue raised by the city annually.

Nutter did propose to phase in the repeal over a period of 15 years, but there were no provisions to provide a halt if benchmarks weren't reached. So basically his idea was akin to cooking a lobster by turning up the heat slowly. The lobster, of course, winds up quite dead, no matter how slowly it gets cooked. The same would be true for City programs after they get cooked by Nutter's tax cut proposals.

I am as progressive as the next person, but I also am sensible enough to face reality.

I am more than willing to pay the wage tax and I am in favor of providing services to our most vulnerable citizens. That is one of the reasons I live in a major city.

But local government has to deal with a transient population that votes with their feet. The state and federal government do not have this problem. Our cities have to find ways to provide the most efficient services possible at a cost that is acceptable to millions of residents.

The wage tax has played a significant role in the mass exodus of population from our city. There is no "collusion" occurring in the business community to lower taxes. Why aren't you decrying the special business tax zones that lower taxes for only the favored few?

After several decades of the highest wage tax in the nation, Philadelphia needs to try something new. Lower the tax and see what happens.

The Councilman's piece referenced Federal Reserve studies, among others, in defending his position. Anyone done the research on these? I did a quick look and found this 2001 article (http://www.phil.frb.org/files/reghigh/execsum.html) containing these two sentences next to each other -- though each deserve their own competing articles:

"The high tax burden in the city of Philadelphia deters job creation. The quality of public education in the city and the suburbs will be a major factor in attracting firms and jobs in the future."

I must admit, my head is spinning...I need a flow chart to follow this thread. I am confused as to why this all started as a Waxman critique of Nutter, but when Goode, Stier, Anastasio (all good guys in my view) talk about tax competitiveness and how the City needs to do more to be business friendly, there's no firestorm of controversy. As for Nutter, I'm confident that when he comes out with an economic plan, it won't be a one-liner that says "eliminate the BPT." I'm sure that it will be a multi-pronged plan with a number of strategies. As for Nutter's record, if folks would dig a little deeper, you'd see that during his legislative career he advanced a number of economic and job creation strategies such as local hiring preferences on city-funded projects, the creation of a business improvement district on City Avenue, lots of economic development in Parkside now coming to fruition, he's the head of the PA Convention Center (convention-related tourism contributes significantly to the local economy). So in terms of a record, there's a lot there.

Hi Everybody –
I’m new to the city, but I’m interested in politics and economic development. So, I’d like to ask a question – A lot of people talk about cutting the business privilege tax, the gross receipts tax and the wage tax, but I haven’t heard a particularly nuanced approach to any of these tax cuts yet. I’ve been keeping up with the tax issue in the Inquirer but I am by no means an expert on this issue, so please bear with me. But, for example, as everyone knows from filing their federal taxes, there are all kinds of exemptions, deductions, and tax credits to make sure that the tax system is, at least in theory, more equitable and to use taxes to influence social policy. Does Philadelphia have anything like this?

I’ll start with the gross receipts tax: a broad gross receipts tax cut sounds like it would help larger businesses that are already in the black more than it would really affect smaller businesses that may be taking in a good amount of revenue but still be in the red. Has there been a discussion about an exemption for businesses that have either, (a) been running for so short a time that they have not seen a profit yet, say 5 years; or (b) businesses that are not seeing a profit at all, no matter how long they have been running? Maybe there is one already in place that I don’t know about?

Likewise, for the wage tax – has there been a discussion about a tax credit for residents of the city who are either in school or paying back student loans, similar to the Hope or Lifetime Learning Credit? From what I’ve read, Philadelphia has some of the best schools in the country, and yet it is hemorrhaging talent. An educational credit would (1) provide incentive for talent to stay, and (2) provide an incentive for residents to learn a trade or skill. I am of course assuming the tax system allows for deductions and credits, but if it doesn't, couldn't or shouldn't it?

From reading about Nutter and the tax issue, it sounds like the former Councilman has some good ideas and some sound policy goals. However, you can't use slash and burn tactics on tax cuts so I'd like him to be more specific if possible. The goal is of course to collect taxes from those who can afford it while providing some breathing space for poorer residents and smaller and newer businesses while not totally eroding revenue collection. From what I can tell, the city has a lot of opportunities to use its tax policy to improve quality of life – for example credits for interest paid on home improvement loans, deductions for businesses staffed primarily with Philadelphia residents, etc…. (Again, I'm assuming the tax system here allows for credits and deductions).

But just from reading the Inky, most of the tax proposals I've heard seem overly broad – like the 10 year tax abatement going on for new developments, almost all of which are luxury homes. But what about the little guy? What about making the legislation more specific, like reserving those rebates for affordable housing?

OK, so now I’m starting to rant, but please, if anyone has any information that would help me understand the tax system here a little better, I would very much appreciate your input.

Go to the city's website (phila.gov)for two sources of information - the Philadelphia Code to directly read the local ordinances related to taxes and the city's Revenue Department page that has valuable information.

WWGjr