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The Philadelphia Citizen - March 29, 2016
BEYOND THE SODA TAX.
The battle lines are drawn. But hardly anyone is asking: Will yet another tax help us grow?
A little over a week ago, I was a panelist on Inside Story, Channel 6’s Sunday morning public affairs show. On air, a bunch of us debated the soda tax. We were in general agreement: Mayor Kenney had smartly played the politics, the soda tax is regressive in that it disproportionately disadvantages poor and working class consumers, and pre-K and the refurbishing of public parks are good causes.
It wasn’t until later that it dawned on me: An unstated mutual assumption informed the whole conversation. We were debating the soda tax, not whether to tax. It felt like deja vu all over again.
Because it always seems like tax time in Philadelphia, and it always seems like we debate individual tax proposals without ever confronting our addiction to tax-first policies. We’re the second-most taxed city in America, right behind Bridgeport, Connecticut—not exactly great company to keep. Just think of the litany of taxes over the last decade or so: Three property tax hikes. The “temporary” sales tax that—lo and behold—has become permanent. Then there are the multiple parking taxes, as well as taxes on cigarettes, liquor-by-the-drink and trash collection. And now they’re coming for your sugary drinks. Philadelphia’s Everyman taxpayer must be reeling, and we haven’t even mentioned job cripplers like the city wage tax or the business privilege tax, since renamed the business income and receipts tax. Not only has there been a new tax every year, but water rates just went up by 12 percent, and PGW will soon raise its rates, as well.
I’m no anti-tax supply-sider; I’m a Communitarian, and we believe in intelligent, targeted taxing in order to serve the common good. We believe in growing the tax base, rather than just taxing more. It’s a simple game plan, and you see its efficacy in high growth cities like Houston, Austin and Boston: More jobs equals more taxpayers equals more money to tackle common ills like schools, crime and unfunded pensions. The alternative is to tax the same citizenry more year after year, stifling economic growth. No wonder Philly’s GDP growth in 2014 was a mere 1.9 percent, second to worst of the nation’s ten biggest cities.
The World Bank recently released a report, “Competitive Cities for Jobs and Growth: What, Who and How.” In it, the authors study 750 cities across the globe, many of which have higher economic growth rates than their host countries. There’s no magic bullet for fostering growth, but there are shared tendencies. And two jump out as instructive for Philadelphia, particularly if you agree that our goal ought to be to the grow the local tax base. First, the study found that competitive cities “tend to highlight the importance of a taxation and regulatory system that is conducive to business and investment.” Second, here’s hoping Mayor Kenney takes this finding to heart: “In competitive cities: a) business leaders were consulted about their needs and the constraints they encountered in their operations; b) infrastructure investments were made in collaboration with the firms and industries they aimed to serve; c) skills initiatives were designed in partnership with firms…”
The Mayor’s transition team report, though, mostly promises more of the same. There’s hardly any mention of reaching out and collaborating with the business community. Instead, there are calls for more “we know what’s best for you” prescriptions, like the recommendation to “realign Commerce activities and create innovative solutions to better support the small business community.”
What’s really needed is a humbler approach, and there’s some early evidence that new Commerce Director Harold Epps, who comes from the private sector and seems refreshingly open, is taking it. Epps is reaching out and listening, which is what the transition team should have urged Kenney to do. I have yet to hear from a major Philadelphia CEO that he or she feels like a partner in economic growth strategy with local government. Instead, it’s far more often that I hear what one well-known entrepreneur told me when I asked if our mayor or City Council members ever asked him for ideas as to how Philadelphia can better compete economically. “The only time I hear from politicians is when they want money,” he said.
So here we are again, with another tax in the offing, and the pro and con sides are taking to the airwaves. But where is the side that stops to ask why we continuously look to new taxes to fund every idea? It doesn’t exist, because one-party towns tend to lack the introspection needed to question the feeding of the beast that is local government. You’d think, given that we just had a mayor’s race, that we would have vetted this issue of who pays for city government, and what that return on investment might look like. Think again.
Jim Kenney, you’ll recall, ran on a platform of providing universal pre-K education, and studies show that pre-K plays a pivotal role in ultimately promoting upward mobility. But did we ever talk about how to pay for the program? Hardly. When asked how he planned to pay for his ambitious plans in the first televised mayoral debate, (the one most notable for then-frontrunner Lynne Abraham’s fainting spell), Kenny responded not by saying he’d favor a tax on soda, something he’d opposed twice before as a Councilman. No, candidate Kenney said he’d borrow from the Montgomery County playbook and institute zero-based budgeting. That would entail each city department starting their budget request at zero and building out to meet their mission. In Montco, the exercise exposed all sorts of political spending and job creep in departmental budgets and reduced the number of public jobs from 3,200 to 2,400.
Kenney ran on zero-based budgeting, but forgot to implement it when he became Mayor. Instead, I’m told the administration used a version of project-based budgeting in putting together its current proposal, which is fine…but it’s not what candidate Kenney promised Mayor Kenney would do. And that’s because project-based budgeting, which merges annually recurring “overhead” line items with the funding of specific projects of indeterminate length, may be smart budgeting, but it doesn’t expose fat in the system. It’s not designed to lead to the kind of efficiencies Montgomery County experienced. Kenny no doubt knew that there would be too many sacred cows exposed using a zero-based approach. But why run on it? Because it’s a helluva lot easier than saying, “I’m going to raise taxes on soda. Vote for me!”
No wonder the electorate is cynical about its elected leaders. Last year, it was the cigarette tax. Now it’s soda. What will they be coming for next? Because, trust me, there will be a next time…if we don’t start creating jobs and growing the tax base.
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