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.

the problem

Is, where does it say lowering the BPT will really create more jobs? Would it be more effective than say, focusing that money on eliminating red-tape for small business owners, or spend it on supporting business through loans, etc?

If you could tell me that lowering the BPT would solve Philly's problems, or actually provide more jobs, I am all ears. The problem is that I haven't really seen that. (After all, there are multiple cities with high tax burdens, but they are attracting plenty of jobs. And there are cities with low tax burdens that are not.)

Business Startups in Philadelphia

As with the city budget, unfortunately the only numbers I could find were macro numbers, so it’s difficult to know the exact details behind the numbers. I'm not sure about total job creation but I think that business startups are a good proxy to examine.

It is worth noting there is research that suggests that Philadelphia may indeed be at a disadvantage when it comes to attracting business startups. The largest differential is not between the inner city and the suburbs but between the middle class areas of the city and the suburbs.

The Initiative for a Competitive Inner City Survey of Businesses revealed that there were 24 startups per 1000 businesses in the inner city compared with 31 startups per 1000 in the suburbs. In contrast in the rest of Philadelphia there were only 18 startups per thousand. The higher number in the inner city does make sense since people have to make a living somehow. At the very least, the survey suggests that those who have a choice between beginning a startup in a middle class areas of Philadelphia or in the surrounding suburbs, go for the suburbs.

Given that rational people make decisions at the margins, my reading of the data is plausible. Furthermore, if those companies that choose the suburbs over the city have more resources and are more likely to succeed or grow, that not only represents a very substantial opportunity lost by Philadelphia, it suggests that the actual consequences may be worse than the numbers suggest. Do I think taxes play a part in the decisions that businesses make on an ongoing basis? Probably not. Do I think that they affect decisions when business operators begin, move or expand? Yes.

Certainly, there are other possible explanations. My point in posting some excerpts from the City’s annual report, however, is that it’s worth noting specifics that indicate the city has not allocated resources as effectively as it should.

Thanks to Dan for posting some charts (city employment, category spending growth, etc.) of current trends that I referred to in the original post if anyone wants to see them. I figured we should think about specifics rather than continue bashing each other.
Exhibit A
Exhibit B
Exhibit C

There is little doubt in my mind that this city needs to cut taxes—starting with business taxes and continue to shrink the number of individuals working for city government. The gross receipts portion of the BPT definitely must go. We should probably also try to spend our money on public transit and teachers, not social workers and cops. Any politician that articulates this rationale coherently just might offer the vision of change this city needs.

Links not cooperating

I'll come back and fix the links tomorrow.

Mike's Charts



14% looks like a lot to me.

14% looks like a lot to me.

uh...

I'm also a little struck by the fact that you could quote this: "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." and then say that the answer is to cut taxes.

And where is the evidence coming from that cutting business taxes for businesses of all size, which would further reduce the city budget for services which small businesses will rely upon, and services which are already terrible, will help small businesses. I'm sure that a cut in taxes for small businesses would help those businesses get started, but so would increasing the value of the services those companies rely upon.

Oh, and I can't get into one of these discussions without reminding the M. Friedman polluted economic thinkers of our time that the best way for government to create jobs is to HIRE PEOPLE THEMESLVES (a la Keynes). Cutting the workforce of the city will make the job situation WORSE, not better, and will further exacerbate the problems which are leading people to choose to live in other cities.

I'm all for paper-napkin economics (where this trickle-down nonsense comes from), just not in the real world. Let's keep the free-markateers locked up in academia where they can't do too much harm! (I know, too many have already escaped, but we're in the process of rounding them up right now)

Draft Zinni! It's Security, Stupid!

My experience

I can't quote a survey or a study, neither pro nor con, on the BPT issue.

What I can tell you is my family and I have been paying the BPT on small businesses since it came into being and I know personally how difficult it is to pay that bill when what you really need to do is spend money on supplies and inventory, additional staffing, health benefits for staff, gasoline for your delivery car, etc.

BUT....I can also tell you, as I sat as a member of the TAX REFORM committee (pre-tax reform commission) created by the Chamber back in 2002, my family's cafes, produce shops, seafood stores and wholesale warehouses WERE NOT the businesses a large majority of the people at that table were interested in helping. And that's too bad because its THOSE businesses and thousands upon thousands like them all over the city that are holding up this economy and creating jobs.

The people at that table, led in spirit by Councilman Mike Nutter (of whom I am personally, if not politically, quite fond) included captains of industry, pro-big business types and younger so-called activists belched out by the Wharton School who recently appeared on Philadelphia’s political scene. The goal was clear -- eliminate all taxes. (small note, there were actually 2 young penn alums there that are true activists & good peeps)

In fact, one actually held up a list of every tax in Philadelphia (16 in all, I believe) and said Philadelphia was dying of 16 different diseases and that these diseases needed to be eliminated. So much for the poor kids & the senior citizens who rely on some of that revenue.

Ya don't get much more Reagan/Bush/Santorum/Cheyney/Rove than that, folks.

general point well taken,

But what still, looking at the national and international level is a few too many steps of abstraction for me to see any real relevance to Philly. There are enough specific variables to contend with if we just stick to Philly. Comparing job growth in Texas and here fails to account for so many factors, as was pointed out above; multiply that many times over when we begin comparing across nations.

I know that anecdotally people talk about businesses leaving the city due to the BPT (although I've never actually heard someone saying such). But is there a way to look at this issue without making it too abstract, or relying on questionable anecdotes?

Messin' with Texas

I don't put much stock in the texas analogy because I wouldn't live in texas -- period -- I don't care how tax free it is. Too many guns, too many klansmen, too many good ole boys and too many Bushes.
I also wouldn't live in Delaware and that state has lower taxes -- not enough of anything in Delaware. And without knowing specifics, how can we treat that info as reliable?

I'm also not sure the BPT actually forces businesses to MOVE out of the city and I wouldn't make that argument in advocating for easing it for small businesses. My argument for lifting that burden would be that small businesses are more likely to thrive and grow, increasing staff and creating jobs and contributing to the economy with a lower tax burden..and then , just maybe they can afford to send their kids to college.

Again, I have no study that tells me this-- only what I've lived and what I've heard from small business owners in the 1st Council District back in 2003 and recently again. And based on that, I support the policies that will lead to middle class tax reform.

Partial Replies to Cutting Government Responses

It is true that I haven't come up with good arguments for eliminating the BPT tax or developed a clear idea for how much it should be reduced. I’ll have to think a little more about that.

The data in general that I quoted (www.icic.org, see research ideas, see heading city profiles--sorry for my inept html skills) is good food for thought. The need to reduce taxes in Philly is further backed up by the anecdotal evidence that Alex loves. Drive down City Line Ave. All the nice stores are on the suburban side. All the crummy small stores are on the city side.

My writing was probably bad so I’m not even going to get into the negative correlation comment Alex but your graph suggests to me that countries that spent more on public services, had less GDP growth per person. Is that really what you wanted to suggest? If I’m wrong in my interpretation of that graph, please tell me how to interpret it next time we meet. It’s absurd to suggest that the U.S. should be growing as fast as a small European country. (Still, we actually had more growth per person than some pretty good mid-sized countries which is downright amazing.) But I think the main point is not that public spending is good. How you spend matters. I’m not sure that comparing Philadelphia to countries that do not incarcerate as many people as we do or have national defenses (cops, maybe in your analogy) and that have smaller and more effective educational systems (trade schools) than Philadelphia is appropriate. I also don’t see how you would account from the subsidies that we do get from the federal and state government for the comparison to be apples to apples. Furthermore, I’m not against the federal government paying for healthcare for all of us—that might be a good investment but Philadelphia should definitely not be paying for healthcare for all of us. As for the Laffer curve, I buy that cutting taxes will reduce revenue. Just because the government receives less money doesn’t mean there is less money floating around so the general welfare may still be higher.

I think it should be remembered that the annual report I quoted--was written in part to suggest that city services were in dire danger by bureaucrats who work for and with our Mayor. It needs to be taken with just a tiny grain of salt. Let’s say that the report is correct and that there is insufficient future tax revenue to meet all of the future needs in the worse case scenario. This to me says that you have to prioritize and eliminate some of your overhead costs to protect the city anyway whether you are in favor of cutting taxes or not. City workers must either make less or there must be less of them or some combination thereof.

Civilization in Pennsylvania and Texas

All goods and services have a price, and taxes are the price of civilization. There is always room to argue over whether the price of the civilization the City of Philadelphia provides is too high. But as the back and forth on this demonstrates the party line of the tax cutters is that the cuts are free they will not lower revenue and will create jobs. As my mentor once argued, while economics teaches us that there is no such thing as a free lunch, you can always steal one. Sadly the push to cut/eliminate the BPT is just that an effort by a well financed minority to escape paying their share towards Philadelphia’s quality of life.

With respect to the state of Texas and civilization you get what you pay for. Median wages in Texas are lower than in Pennsylvania; Poverty rates in Texas are higher than in Pennsylvania. While 7 percent of Pennsylvania children under the age of 18 had no health insurance coverage, 20 percent of children in Texas had no health insurance. In Philadelphia County, 11 percent of children had no health insurance coverage in 2000, in Harris County Texas (Houston, TX) this figure was 21 percent, in Tarrant County (Fort Worth, TX) this figure was 17 percent.

Don’t get me wrong, local governments like Philadelphia don’t always produce the right kind of service in the optimal amounts. After all by one important measure the city of Philadelphia looks a lot like Texas the state with some of the poorest places in the country. A quarter of Philadelphia County lives in poverty. This is scandalous. And yes, there are people in Philadelphia handing out checks for $1,000 in a push to secure tax relief for people who don’t live in poverty. How about some targeted money for measures that actually link a poor person to a job that pays a living wage. How about $1000 for job training! How about $1000 of college tuition money targeted to poor children in Philadelphia!

Alex, I like abstractions

so while I'm not convinced of the applicability to the BPT in Philly, the discussion is interesting - and I can maybe lern' sumptin.

You say.."The point is that if there was any sort of merit to the cutting taxes=rising employment (which also should, in theory be related to rising GDP) then you should see a fairly strong negative correlation between government spending and GDP"

Ok, I know that determining public spending as a percentage of GDP is a pretty complicated task (typical of economics, people seem absolutely convinced about the veracity of different figures - and anyway, is individuals paying for their own healthcare actually a form of public spending?) - but as I'm sure you know, one of the favorite anti-tax rallying cries is the supposed correlation between high unemployment, high taxes, high public spending as a percentage of GDP, and relatively low GDP growth in (booo, SOCIALIST!!) Europe (France and Germany in particular). Then they carry on about comparisons to correlations between low public spending as a percentage of GDP, relatively low unemployment, relatively low taxes, and high GDP growth in the US.

As you point out, a belief in the validity of such comparisons is likely at least part of what undergirds the arguments of those who favor BPT elimination (at least those whose primary interst is the welfare of the city and not lining their own pockets).

The chart you posted indicates that there is no direct correlation between public spending and GDP growth - but how do you see those data linked to other factors like labor regulations, unemployment, etc. What do you say to those who are waiving their paper napkins at you when they talk about the unemployment rate in France? Also, the chart looks at the relationship between public spending and GDP growth, but that isn't necessarily the same thing as looking at the relationship between taxes and GDP growth - do you know of any figures that break the "public spending" down to look at the ratio between public spending and the amount of taxes collected? Finally, you assumed a direct relationship between GDP growth and high employment; but, as we've seen in the US in recent years, isn't that assumption problematic?

Oh, and while you're at it, please explain exactly how each of those factors relates to the specifics of the situation in Philadelphia. :-)

Joshua

Faith-based conclusions?

Good post, but despite reading carefully, I still don't see where you provide data to show the merits of eliminating the BPT. In fact, the implication I take from the data you did show is that given the projections of future spending obligations, reducing tax revenue is precisely the wrong thing to do.

I can see why you might assume that the BPT has an inhibiting influence on business startups - but it would be nice to see some hard data to support your conclusion that the influence of the BPT is any stronger than, say, poor city services attributable to insufficient city revenues, or the fact that the consumer demographics of surburban residents are probably very different than those of residents of middle class city neighborhoods.

public transit and teachers, not social workers and cops

Mdcphilly wrote “We should probably also try to spend our money on public transit and teachers, not social workers and cops.”

I’m not sure I understand this sentence, do you mean it would be nice if Philly didn’t need as many cops and social workers or do you mean to argue that the city has too many police and social workers?

you know it's serious...

...when Alex comments. I'm glad I'm on his good side this time...

And...

If public spending and growth are so intertwined (negatively correlated in your hypothesis), care to explain the following graph:

I would ask that you go back and take a look at your assumptions again- me thinks there's an error in the equation.

And for those who didn't get the paper-napkin mention, click here.

Draft Zinni! It's Security, Stupid!

the fact is...

that most economic discussions are forced to rely upon abstractions and a enormous amount of assumptions, and so there really isn't a way, other then personal stories, to get a good, scientific, view of what the actual effect of the BPT is. Actually I'd say that even on the mid-level we're talking about- i.e. the municipal/local level- there are "so many factors" that it will always be impossible to get to the "real" economic causes and effects without abstractions and assumptions (the key is what are the assumptions, and how closely do your abstractions reflect reality- i.e. if anyone says "rational choice" please do me a favor and laugh as loud as you can).

Ask 10 free-market economists (which is, at the moment, just about all economists) to explain why the BPT is bad, and I'll bet you 7 of them will include "widgets" or some other abstract good in their explanation.

At the very least looking at Keynes' theories on the macro level we can see the truth of his assumptions- because they worked. To the degree that economics works on the national level in the same way as the local level (which may be extremely small, I don't know) then we can deduce that lowering taxes will either have a net loss effect on the job economy, or it will at the very least not improve it.

Deficit spending should be spent on actual job creation- i.e. the city should hire people- not on enriching the wealthiest members of our city and hoping against all odds that the money they save will not be saved or used on luxury goods but instead used to create jobs. (Again, this doesn't apply as much to small businesses, since as Vern noted, they consistently struggle, as do middle-class people in general, with their tax burden.)

Draft Zinni! It's Security, Stupid!

on the right track

Mike

I gotta make this quick because my battery is about to run out, but I guess I would say that I care share your concern about the city running out of money over the long run and the simplest solution is to increase median wages of all Philadlephians to organically boost revnue.

You could cut city jobs, but as Alex has already said, cutting some of the few decent wage jobs we have that are available to workes at varied skill levels seems like a bad long term spending decision. Sort of comparable to hocking a diamond ring to pay for a meal at McDonalds (bad analogy?).

A wiser solution, to me, is to more effectivly spend economic development dollars on creating high-wage jobs. This could be achieved by targeting cluster industry growth or by providing more substanative assistance to small businesses like supplemental ghrants for purchaisng healthcare or buying pools.

Spending money to create decent wage jobs (not just any jobs) is a smarter way to spend current city revenues as opposed to gambling on BPT elimination which is at best a short-term gain in the midst of Philadelphia's other problems.

Fun With Numbers!

your graph suggests to me that countries that spent more on public services, had less GDP growth per person. Is that really what you wanted to suggest? If I’m wrong in my interpretation of that graph, please tell me how to interpret it next time we meet.

First of all- no it does not- it proves that there is NO CORRELATION between the two figures, which in my mind disproves the idea that there is a direct correlation between taxes (since spending is a fairly good indication of taxation) and economic growth (or GDP growth). There are 22 dots on the map. 8 of nations have higher GDP growht then the US (of those 7 spend more then the US and the lone slacker was poor as dirt a decade and a half ago), 5 of those nations have the same GDP as the US and all spend more, and even in the final 8 you can see a broad range of GDP/growth ratios. In other words THERE IS NO, ZERO, ZILTCH, NADA connection between the two.

Actually, if you took into account the fact that the US isn't taxing, is building a massive future defecit, to maintain it's average growth rates should set off some alarm bells.
Second- government spending is not a measure of "waste" as the greedy "me-firsters" of our nation would have you believe. Take a look at the nations higher on the spending list and tell me- how many have better quality of life for "normal people"- i.e. the median wage earners? I'd guess all except for 3 (Portugal, Spain, and Greece). THERE'S YOUR POSITIVE CORRELATION!!! Government spending = a more equitable redistribution of society's wealth with ABSOLUTELY NO negative effects on GDP.

But, capped words aside, I do realize that the Macro and mid level (term?) economies work differently...

Draft Zinni! It's Security, Stupid!

some more comments

It’s absurd to suggest that the U.S. should be growing as fast as a small European country

Uh. Why exactly is it absurd? The US is the biggest economy in the world (though I don't believe it's as big as all of the EU nations combined- I could be wrong) China is waaaaay bigger then us and is growing waaaaaay faster then us, so where exactly is the logic here?

I’m not sure that comparing Philadelphia to countries that do not incarcerate as many people as we do or have national defenses (cops, maybe in your analogy) and that have smaller and more effective educational systems (trade schools) than Philadelphia is appropriate.

Mike- you seem to want to compare only the things that would make your argument work. Why don't we just get that out of the way- what economies should we be comparing this too. AND- what exactly are you basing your assumptions on? What did you use to create those assumptions? What scale were those assumptions based upon? yada, yada, yada. You are making quite a simple statement-> a reduction in taxes or services will lead to an increase in growth, which is based upon... only your personal observations. And yet, underneath this economy there is much, much more going on then you can see while you drive down city line ave.

Just to give you a quick example-> near my parents house in Germantown is the border for East Falls. I remember when I was a teen (early 90s) that they started selling townhouses on one side of Wissahickon for over $200k. On the other side of the street you'd be lucky to sell yours for $100k. Why? Does it have to do with taxes? No. Does it have to do with the assumed quality of life that goes with the name "East Falls" (where the Governor and many a rich person reside)? Of course.

As for the Laffer curve, I buy that cutting taxes will reduce revenue.

Huh? The laffer curve, again part of the neocon theory of economics (same school, different department), doesn't state that cutting taxes will reduce revenue, which is just basic common sense. It states that reducing taxes will INCREASE revenue, since supposedly the taxes were holding back spending and investment. It is one of the absolutely stupidest theories out there, used by knaves and thieves to justify the pilfering of the American public. It has no basis in reality, and has been disproved TIME AND TIME AGAIN (god, I wonder why Reagan was the beginning of our record deficits?).

If we're going to allow supply-side economics to be talked about like it's a reality, then I put forward a motion that we also allow for Phrenology to be talked about. After all, my observations tell me that people with your skull's shape and size show an unusual tendency to fall for arguments when presented by professors at universities, regardless of their merit. ;-)

Draft Zinni! It's Security, Stupid!

The History of the World, Part XXIV

Wow- those are some tough questions, and while I'm not prepared to write an entire masters thesis today, I'll try to address some of your points:

is individuals paying for their own healthcare actually a form of public spending?

Good question. If you added health care you’d add somewhere aroundhttp://www.nchc.org/facts/cost.shtml >15.3 percent to GDP, though I’d guess that this already takes into account Medicaid and Medicare. If you added higher education spending you’d get an additional 7.3% added to GDP, though again I’m uncertain whether this includes federal and state subsidies in the US (I assume it does). However, I don’t believe that would effect my original point-> that taxation is not directly linked to GDP growth.

Then they carry on about comparisons to correlations between low public spending as a percentage of GDP, relatively low unemployment, relatively low taxes, and high GDP growth in the US.

I am not really qualified to answer this, but I do have an opinion! Here I would ask how valid of a measure of economic growth is GDP? I would prefer to see something which took into consideration the growth at the middle of societies, rather then the mean. As one econ professor asked a class I had-> if Bill Gates walks into a room the mean wage of the room just jumped into the millions. Does this mean the rest of the people in the room just got richer? I would argue that unbalanced GDP growth (growth at the top, shrinking at the bottom) is extremely detrimental to any society, but esp. one driven by consumption. But that’s a whole other topic…

how do you see those data linked to other factors like labor regulations, unemployment, etc.

Well, I don’t really. Those factors are not presented in this data set.

Also, the chart looks at the relationship between public spending and GDP growth, but that isn't necessarily the same thing as looking at the relationship between taxes and GDP growth - do you know of any figures that break the "public spending" down to look at the ratio between public spending and the amount of taxes collected?

Yes. It’s called a budget deficit or surplus. I doubt any of these nations prints money when it needs to pay for services, since that would destroy the value of their currency. Other then that spending must equal taxes- the money’s got to come from someplace (even, as in our case, if it’s from the future).

What do you say to those who are waiving their paper napkins at you when they talk about the unemployment rate in France?

First, I would say that the world does not run on economics alone. It is nice to be able to fit the world into a nice and simple concepts (and what concept is simpler in it's stupidity then the laffer curve?) but unfortunately the way the world works doesn’t always fit nicely onto a 3x3 piece of paper. If you want to understand why France is the way it is today you have to look at the whole picture, not just those aspects that you can grasp easily or that confirm to the reality you WISH was there. That is free markateers are the neocons of economics- they think the world fits neatly into their mental constructs. If there's one sure way to crash an economy and destabalize a nation, it's handing it over to free market economists (just ask the Asians and South Americans). Those economies were supposedly going to greet us as liberators, instead they have seriously harmed both the economies of those nations and our soft power in the world.

But, I'm not here to stand up for France and the way they run their nation. However, while France has 10% unemployment, and 10% unemployment sucks- But what about the percentage of population that is incarcerated, the high levels of uninsured, the high levels of poverty (esp. childhood), the low levels of education, the shrinking of the middle class, etc. etc. To me these things suck. And they suck a whole lot more because they effect so many more people. The fact remains that life is easier for the “normal” (median) person in those European nations then it is for the “normal” person here.

People who say that things are better here then in Europe for “normal” people are a) disconnected from reality, b) wealthy, c)lacking in intelligence, education or experience in the real world, or d) all of the above.

Finally, you assumed a direct relationship between GDP growth and high employment; but, as we've seen in the US in recent years, isn't that assumption problematic?

Did I say this? My bad. I’d say you are 100% correct that the two don’t always go hand in hand. But- does that mean that taxation is correlated to employment growth? Nope.

Also- I don’t want to give the impression that I’m attacking my main man Mike (mdcphilly). I have a beef with free-market theories, and esp. the academics who refuse to take a look up from their nice theories to observe the ways in which the world actually operates. I apologize if it was taken as an attack against Mike…

But let me also say this-> I am someone in the process of (hopefully) starting a small business in the city. And though the taxes are high, they're nowhere near my biggest problem nor my biggest fear. What are the biggest problems? Try L&I, zoning, the liquor control board, and any other piece of city bureaucracy that small businesses have to deal with. Those are the things that worry me, and those are the things that make it difficult to do business in the city. I also worry about the quality of life in the city. SEPTA sucks ass, people love to use their guns way too much, and thousands of properties stand empty while tons of people can’t afford housing.

We should be focused on improving city services, not giving away tax breaks that bankrupt the city.

Draft Zinni! It's Security, Stupid!

Maybe it's just me

But I'm not sure where showing comparative percentages of national GDP devoted to public spending in different countries is necessarily any more relevant to discussion of the BPT in Philadelphia than undifferentiated statistics comparing job growth in Houston and Philadelphia.

Vern's suggestion of scaffolding business taxes based on business size and past concessions and subsidies seems more relevant; but, while the discussion is getting more interesting, I'm still haven't seen any statistics that really make a strong case (to me) for eliminating or maintaining a BPT either way.

It seems to me that people on both sides have more or less posted comments based more on (faith-based?) underlying perspectives on the wisdom of taxes than on real analysis of the economic circumstances particular to this city. Population and job growth in Phildelphia are obviously very complicated phenomena, correlated with many, many factors.

Does anyone know of any surveys which have been done on the real reasons why businesses have left Philly or chosen to begin operating in the suburbs rather than within the city limits?

While I'm much more sympathetic to the point of view that arguments in favor of cutting the BPT are based on "paper-napkin" economics, I know that my preferences are more tied to my underlying political perspective more than on real insight into sophisticated economic analysis. As such, I don't quite get the self-righteousness embedded in the personal attacks being posted. What am I missing?

Bigger you are, more difficult it is to grow...

It’s absurd to suggest that the U.S. should be growing as fast as a small European country.

It's a simple rule of size that the bigger you are (and whether you are talking about GDP per capita or overall GDP matters not) the more difficult it will be for you to grow. China is bigger in land, not in GDP which is what we are talking about here, which is one eighth of the U.S.'s. In terms of the GDP per capita, the great majority of those European countries have GDP per capita that is lower than ours and hence it's easier for them to have larger growth rates. Furthermore, they are arguably competing on a lower cost basis on average so some of their growth simply represents a catch up.

Big mutual funds that have spectacular growth and then attract enormous amounts of capital have difficulty sustaining their growth. The more you have, the more difficult it is to find good investments. Wal Mart had 30% growth for thirty years. Now it has 3% annual growth. If it could sustains its 30% growth for another decade or two it would be bigger than the world economy. That is simply impossible.

Any answer?

Did anyone respond to this? I think it's a great question ... how can a city be a good place to live if it's not safe and people who need it don't get help?

correlations

"But I'm not sure where showing comparative percentages of national GDP devoted to public spending in different countries is necessarily any more relevant to discussion of the BPT in Philadelphia than undifferentiated statistics comparing job growth in Houston and Philadelphia."

Because, ideally, taxes are being raised for those expenditures, so that the nations who spend the most are also the ones that tax the most. So- those nations with higher spending SHOULD have higher taxes (though the US has increased spending while cutting taxes, which has resulted in our horrific national debt). The point is that if there was any sort of merit to the cutting taxes=rising employment (which also should, in theory be related to rising GDP) then you should see a fairly strong negative correlation between government spending and GDP.

And if you want a good, non-faith based, book to read on the silliness of the less taxes= more jobs, try Keynes' General Theory of Employment, Interest and Money. Even though the book is about as easy to read as Bush's "thought" process, it has been tried and tested, and as those people who were pulled out of the great depression by Keynesian economics can attest, proven to be true.

But is that still too faith based? I know it's not specific enough to this city, but it does illustrate that the major underlying assumption is bunk.

Draft Zinni! It's Security, Stupid!

With apologies to social workers

I know many great social workers so I'll stop bashing them. My main points are two: protecting city services by and large has meant increases in human services and the support staff of the criminal justice system. In fact, I believe the number of police in Philly has remained quite stable.

The issue is that what most people who turn to human services need is not a food cupboard referral but a job. Many of the services that human services supposedly provide are unclear anyway because food cupboards don't tend to be staffed on evenings or weekends when working individuals are free--it does cost more to be poor, but that's just one example and that's an entirely different story. If you talk to any politician or bureaucrat leader in this city about the contracts that are handed out to human service agencies around the city, they will argue DHS and it's nonprofit agents (who tend to be well connected with city pols) are professionalizing human services to make them more effective. This basically means replacing city community members who really aren't up to the job with MSWs from Penn and elsewhere who still probably won't make a difference. In otherwords, the working class community member that used to staff the food cuboard or whatever program eventually loses their job--although they tend to be kept on since no one really wants to be harsh and make tough decisions and the MSW--who is not going to be any more effective and who is going to cost a hell of a lot more is now going to be a permanent part of the city payroll and infrastructure. I worked at nonprofit social service agency for almost two years and this is precisely what happened. There are dozens of social service agencies in this city with budgets of millions of dollars.

To give another example: are you familiar with the term TSS. A TSS is a Therapuetic Support Staff. Typically, they are assigned by the court or DHS or the foster care system to trail little boys and girls in the Philadelphia school system to monitor them because they have anger issues or challenge the teacher or their parents can't control them. Over time the supposedly help the kids get under control. They make about $15 an hour. I don't know about today but in 2001, the budget for TSS placed in the Philadelphia school system was $44 million dollars. In about 1998, I think the budget for TSS was $10 million dollars. That's damn quick growth--serving the same population of kids. I met some of the kids with TSSs--I think about ten percent of them really needed the attention the TSS provided. The other 90% just had parents who were too lazy to provide the parental discipline they should have been providing. The example of the TSSs is not special. Similar examples could be cited in the Juvenile Justice system and throughout our city. This part of what we pay taxes to support?

The overwhelming cause of crime is poverty. I don't see how investing in social workers or prison staff helps those who are being left behind Philadelphia.

Whew!

I'm not familiar with the TSS program, but in a previous life I was a special education teacher in the Boston area - and I was responsible for consulting with teachers regarding the "mainstreaming" of kids deemed to have emotional or behavioral difficulties. And your comment that: "The other 90% just had parents who were too lazy to provide the parental discipline they should have been providing." - really seems like an absurd overstatement and simplification.

First of all, based on my experiences, I would guess that the majority of that 90% you mention come from dysfunctional homes. (If you want to say that the fact that the parents are dysfunctional or have dysfunctional relationships with their children is proof of their "laziness," well, then I'd really have to question why you were working in a social service agency.)

Secondly, I'm sure that the majority of the 90% come from impoverished backgrounds, which is certainly a contributing factor to their motivation and general attitude about schooling: Obviously, it's much more likely that kids will have behavioral difficulties in school if they see no real meaning in their school activities, or if in the environment in which they grew up they saw few examples where attention to schooling correlated with success in life. (If you want to say that the fact that the parents and their communities were poor is proof of "laziness," well, see my comment above).

Finally, I would say that frequently the fact that kids have behavioral difficulties in school is at least as likely attributable to the inflexibility and limited methodologies of our schooling systems as it is attributable to deficiencies of the kids themselves - and certainly to the character of kids' parents. Many of the kids who "act out" are among the brightest and most creative of their cohort - attributes that sometimes stand in conflict with the prevailing attributes of the "model student," i.e., conformity and obedience. Do you believe that creativity and divergent thinking in kids would be directly attributable to parents' laziness?

Statements like the one you made above do little to convince me that your interest in "promoting the competitiveness of Philly's business community" through "tax reform" is really based on a solid understanding of the real social fabric of our community.

Social workers are evil just like the school lunch lady!

Mdcphilly wrote “We should probably also try to spend our money on public transit and teachers, not social workers and cops.”

Mdcphilly wrote “My main points are two: protecting city services by and large has meant increases in human services and the support staff of the criminal justice system. In fact, I believe the number of police in Philly has remained quite stable.”

Mdcphilly wrote “I don't see how investing in social workers or prison staff helps those who are being left behind Philadelphia.”

So “support staff of the criminal justice system” = “prison staff” which is ok if that is what you mean. It is just that your argument seems to move rather easily from “cops” to “support staff of the criminal justice system” to “prison staff”. So is it now too many social workers and prison staff?

Mdcphilly wrote “The other 90% just had parents who were too lazy to provide the parental discipline they should have been providing.”

Let me begin with reason, social work and much of social policy is aimed at children precisely as a means of compensating for the outrageous fortune that means George Bush and Paris Hilton were born into the lap of luxury and millions of other children into poverty. George and Paris can be unremarkable and even slide into wanton debauchery, they can have industrious or “lazy” parents but the safety net which is their family wealth means they will live better and perhaps even achieve more than most. Meanwhile a poor kid in Philadelphia can walk the straight and narrow and get gunned down in the street. Yes, life is unfair but small investments early make us all (George and Paris included) better off.

Let me add with venomous outrage, try walking a mile in someone else’s shoes before spilling such drivel onto the web. Imagine what it must be like to raise two children by yourself, at one or even two jobs with an annual take home pay of $20,000, I don’t know how people do it.

Now, back to your theme too many social workers and too many prison staff. How many are there in Philadelphia? How many actually work for the city? And relative to a simple measure like say the population, how many are there and how does that compare to similar sized places or places with similar demographic characteristics? These relative comparisons would be much more persuasive.

Trades offs in what we invest in...

There are always trade offs to where we spend our money. I won't write anything else about social workers and will get back to the questions of race and economics being discussed.

But, personally, if you have politicians running for office that might as well have a slogan: I can't give you a job, but I can protect all of your socials workers and bureaucrats--I think that's a pretty sad and outrageous state of affairs. It is a very legitimate question: If you have $65,000 to spend on salary and benefits, would you rather spend it on an individual with a masters degree in social work who lives in the suburbs or would rather give teachers a raise or hire more teachers? Unlike many people on the left, I don't believe we can solve everyone's problems. I think we should be honest that we can't. Change will almost always have relative losers with a vested interested in the status quo.

Social work is a growth industry because it's much easier to just give people a title, put them in a building and say someone is working on the issue than it is to radically change the status quo and address the underlying problem. I'm not suggesting that all Philadelphia social workers be canned. Many are needed to work in our hospitals as they do, to provide drug treatment couseling and much else.

Don't tell me to go walk in somebody else's shoes or that I'm spewing hatred. I'm in the worse Philly neighborhoods on a regular basis. I know how bad it is. They are terrible in many ways. But I've never with the exception of a half a dozen blocks and back alleys found them all that dangerous or the people less than incredible and interesting. I'm insipired every day by what people, including many friends and neighbors overcome on a daily basis. I see potential and opportunities everywhere I turn. I've spent more hours organizing to improve Philadelphia neighborhoods, more hours teaching in public high school class rooms and more hours trying to help start businesses than 99.9% of the people in Philadelphia region. Given the challenges and the ineffective political leadership that we often have, I don't know what else I can do. Not only do I care, I spend almost all my free time making a difference. I hope you do as much.

Actually, what would be a real travesty is if everyone here weren't interested in changing the status quo. One of the main problems in America is that everyone lives, works and discusses issues with people who agree with them. As a result, there is no creative thinking or is interested in honest dialouge. I love the thought provoking discussions that happen on this site. It gives me some hope for Philadelphia's future that so many care so much. If I don't always express myself with the care that I should you should remember as I will with you--one of the primarily concepts in effective adult education and community organizing: you can't start with people where you want them to be, you have to start with them where they are.

Lastly, I fondly remember the lunch ladies from my days in high school. Many people hated the food. But I thought the turkey ham hoagies hit the spot!!! Besides, the lunch ladies used to tell me I had a sexy voice--and you know, as a nerdy teenager, women didn't tell me that very often. Evil? Not in my day.

What we have here is a failure to communicate.

Forgive me if I’m putting words in your mouth but I think you believe that the city currently employs too many people. It is a moving target but I think you believe that a part of the problem is “prison staff” and most definitely social workers.

The question is can you prove it? How many is too many, 10, 1000, 1 for every 100,000 residents? New York City has X but Philly has XX! Please pick a measure any measure!

Seriously I’m really curious, I don’t know the answer, I love data (a bit too much perhaps). I doubt it will prevent you from making your case but what it will do is reign in your odd and lurid proclivity for making outrageous claims.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Syndicate content