- 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?
Philadelphia Needs a Business Tax Cut and Some Government Workforce Cuts
Given the current debate at YPP about whether Business Tax cuts are necessary and how government should operate, I went and did some research on the city’s budget. (This is a separate issue from whether our government should be more ethical and transparent—of course it should.)
I believe that the future of Philadelphia depends on supporting an equitable environment for small businesses. We can’t depend on manufacturing to pay decent wages and it’s a simple fact that everyone can’t have some new economy high wage job that pays well. It’s true that I have a hard time imagining enough bakeries and neighborhood services to keeping everyone fully employed but it appears to be the best option. Better ideas are welcome.
Now, I’d like a Philadelphia political leader that was willing to tell the local cable monopoly to take a walk, tell the local trade unions that they aren’t entitled to so much money on public projects, that has a light hand when it comes to enforcing drug laws and who initiates some serious gun control efforts. But for a start to get to where Philadelphia needs to go, I’d settle for a good sized business tax cut and a reduction in the city workforce. Business taxes currently contribute 14% of the city's income. I don’t know if the chamber is really asking for a complete elimination—I’m not—but should taxes be reduced lower than they are now, absolutely.
Cuts in the city’s workforce would certainly hurt. It would hurt some services. It would fall disproportionately on minorities. Yet, it seems to me that it would be better to take our medicine now and cultivate some small businesses before we have no jobs for all those who are currently un- and under-employed and no tax revenue to support all the services our city needs.
Looking at Philadelphia's last budget document, there are a number of charts worth examining. See the City Budget Report if you like. Included among the report are charts for changes in the number of city employees over the past fifty years, a chart showing primary spending categories and a chart showing how the city derives income (real estates, wage, business taxes). I think the information suggests that even if it’s not going to be fun, City Government must slim down more than it has.
Essentially, Philadelphia government has had about 25,000 city employees for the past five years although these numbers don’t appear to include part time employees or School District employees--which would inflate the numbers more. The bureaucrat writing the report argues that the city has done a good job of stabilizing the work force and that it is the smallest workforce in close to 50 years. I think the more pertinent question should be, is it really the size necessary to do the job today?
What is clear is that spending on wages, healthcare (page 104) and pension costs (page 34) for city employees are growing extraordinarily. Page 33 is especially revealing so let me quote the main issue, huge increases in pension and benefit costs:
This dramatic increase in pension obligations effectively “crowds out” the City’s ability to provide funding for other services while maintaining a tax reduction program. After adjusting for inflation, the City’s unrestricted revenues from taxes and other local sources have essentially been unchanged over the last ten years, yet, as shown in the chart below, the City’s costs for pensions and benefits have increased dramatically. In addition, the City’s criminal justice costs for police, prisons, courts, and other services have also increased dramatically.... In order to maintain fiscal solvency in these conditions, the City has been forced to make deep cuts in internal support and administration and develop valuable efficiencies.
As pension obligations increase over the next five years, these choices will become even more difficult, particularly with no revenue relief in sight due to continued tax reductions. Pension obligations represented 6.9 percent of General Fund revenues in FY02. By FY09, this proportion is projected to increase to 12.7 percent. Pension and health and medical obligations combined represented 13.4 percent of General Fund revenues in FY02; this proportion is projected to increase to 23.5 percent, nearly one-quarter of General Fund revenues, by FY09. In the absence of additional revenues – and the most optimistic “supply side” economic model projects that in any tax cut scenario, the City would lose revenue from the tax cut in future years– the City must fund this additional 10 percent of the budget that goes to pension, health and welfare obligations by cutting an amount equal to 10 percent of the budget from other areas.
Given that what Philadelphia really needs is jobs that contribute to the overall income generated in the region rather than those that just utilize it, the axe needs to wielded. Over half of the city's expenses are for personnel wages. A substantial part of the rest is for public servants getting more than we can afford to pay. I'm all for making sure the trash gets picked up but there are at least several city offices that could be eliminated and no one would even know the difference. Business tax cuts must be more drastic than they have been until now. Sure I'd love it if Harrisburg and D.C. contributed their fair share but a responsible Philadelphia political leader would help us make the admittedly--really hard choices that have to be made because Harrisburg and D.C. may, very well, never come to the rescue.