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Philadelphia Inquirer - June 3, 2016

Commentary: Philly-only taxes are the problem, not a solution

There has been a lot of discussion in Philadelphia about a proposed soda tax and, alternatively, a proposed container tax.

It is argued that the taxes are regressive and will fall most heavily on those least able to bear them. Obviously true.

It is argued that the goals, primarily universal pre-K and rebuilding infrastructure, are laudable. Again, obviously true.

There are other ways to accomplish the goals, however, and history tells us that this tax-creation approach is counterproductive.

Philadelphia is not on an isolated island. Whenever Philadelphia creates a tax that does not apply on the other side of City Line Avenue, or has a business regulation that does not apply on the other side of City Line Avenue, or has tax rates higher than on the other side of City Line Avenue, there is a predictable reaction. We lose businesses, jobs, and taxpayers. It's really that simple. This is supply-and-demand economics, proven by its application in Philadelphia over three generations.

Philadelphia is a great city. We have some of the finest universities and hospitals in the world. We are in the middle of the most populous part of the country, midway between Washington and New York. We have access to an important port. We have ready access to both freight and passenger railroad service. We have public transportation infrastructure that few can match. We have a vibrant and walkable Center City.

With all that going for us, how in God's name did we become, by many measures, the poorest big city in America?

Here's one reason: small-time politicians who don't care about the city's future but only about what they can promise to get reelected.

How many times have you read about some group or another thanking a City Council member for getting it the money it needed for some worthy project. Rest assured that councilman did not cover the amount out of his personal checkbook. The prevailing governing philosophy of Philadelphia is: Come up with an idea that will make political supporters happy? Let's do it! We'll just raise taxes again to pay for it. Or create a new regulation.

Here is the circle of governance created by that philosophy: Politicians give supporters programs to get reelected. Taxes are raised to pay for the programs. Businesses, jobs, and taxpayers flee the city. The diminished tax base cannot pay for the programs. The programs need to expand to meet the needs of the poorer remaining population and those attracted by the programs. The politicians raise taxes again and create more programs. More businesses, jobs, and taxpayers flee the city. Around and around.

In the case of the soda and container taxes, they target a specific industry. Fair taxes are broad-based, but not the current proposals. And the biggest losers would be the retailers who have already lost business because Philadelphia has a sales tax that is two percentage points higher than the surrounding counties' and a $2-a-pack tax on cigarettes that does not apply anywhere else. Notice the signs advertising cigarettes just outside the city limits?

Some proponents of the soda tax talk about the health benefits that would result. I don't need City Hall to tell me what I should drink. If they really cared about our health and thought that this was an answer, why didn't they introduce it as a revenue-neutral change in tax policy, lowering the wage tax dollar for dollar? Why not tax candy? Our beloved Tastykakes? For that matter, sugar itself? Hey, Philly cheesteaks aren't exactly health food, are they?

Supporters of the tax are right about the need for and value of universal pre-K education - although their plan is not universal and will not lead to the quality our kids deserve. However, the answer is not to promote policies that encourage jobs to leave and condemn more children to grow up in poverty. We already have one of the highest tax burdens in America.

Instead, re-prioritize the budget. If something in there does not pay directly for public education, police, fire, sanitation, or the infrastructure needed to run a city, it should be on the table long before tax increases. Corporate welfare programs - a.k.a. economic development - should be first on the chopping block.

The same thinking that got us into this problem now has a solution. And it's the same "solution" - new Philadelphia-only taxes - that created the problem. Surprised?

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