Deja Vu All Over Again

By Brett Mandel

 Taxes have been described both as "the price we pay for a civilized society" and "the power to destroy." In Philadelphia, the price we pay for our civilized (and sometimes not so civilized) society is also destroying our city.  High and unfair taxes chase firms and families out of the city and also force some to pay too much while others are not paying their fair share.

   As a result, Philadelphia has endured more than its fair share of job loss, economic decline, and increased poverty.  One might think that somebody would take a look at this issue of taxation and try to find a solution.

    Of course, somebody has taken a look...and another....and another...and another.

   Economists have written white papers and reports and issue briefs.  We have empanelled commissions to make recommendations. We have had review forums to examine those recommendations. We have had summits to evaluate the examination of those recommendations.

   Finally, we elected Mayor Michael Nutter, who promised as a candidate to boldly to fix our tax problems.  Last spring, he strode purposefully toward a podium to address Philadelphia's leading corporate citizens and announced that he would...create a task force to examine the issue.

   The Mayor's Task Force on Tax Policy and Economic Competitiveness recently completed its work and concluded - no surprise -- that Philadelphia taxes too much, taxes the wrong stuff, and taxes unfairly.  The Task Force recommended that Philadelphia cut the wage tax, reduce the Business Privilege tax, and make real estate taxes fair and understandable.

Not what, but how

   If that sounds familiar, it is because it is. The recommendations echo those of every group that has studied Philadelphia taxes in recent decades. 

   When it comes to taxes, Philadelphia has made progress in recent years, with reductions in the wage tax and business taxes. The issue of real estate taxation is currently the focus of a debate that will likely lead to improvements.  But, why are we still wasting time wondering what we should do instead of focusing on how we should do it?

    Mayor Nutter did not run on a platform that, if elected, he would study our tax problems. He had his own well-thought-out tax plan that was variation on the reduce-taxes/change-the-tax-mix/make-taxes-fair theme that is so familiar.  The major appeal of the job of chief executive is that you get to do stuff instead of just complaining about stuff. So why not act?

    It is not because the necessary actions are difficult to accomplish.  Of all the issues confronting the city -- high crime, underperforming schools, a football team that underutilizes the running game -- local tax problems are the only problems elected officials can "solve" problems within a matter of weeks.  Where so many other problems involve layers upon layers of societal failures and governmental jurisdictions, local tax problems are pretty easy to deal with.  The Mayor and City Council simply have to pass legislation to cut taxes, enact laws to alter the tax mix, and adopt policies to improve tax fairness.  Then -- violà -- our tax burden can be  reasonable, our tax mix sensible, and our taxes are fair. 

No more committees

  Of course, studying change is much easier that making it. Inaction is a way to avoid the risk of angering one group or another who prefer the status quo.  But, we didn't elect Michael Nutter to preserve and protect the status quo.  We elected him to shake things up at City Hall -- not form committees. 

    Given the recession and the economic meltdown, the challenge of reducing the city's tax burden has certainly become more difficult.

     Confronted with declining tax revenues, the mayor this year opted to freeze scheduled declines in wage and business taxes and increase the sales tax from 7 percent to 8 percent. Both these measures are intended to be temporary.  Those steps were certainly easier politically than the overhaul of the bureaucracy required to reduce the high cost of city government.  But, the Mayor knows -- and his own commission reminded him -- how these tax policies hurt the city in the long run by continuing the cycle of increased poverty and job and population loss.

     We have wasted enough time studying this problem.  Let's make the Nutter tax-reform commission the last tax-reform commission. And, please, let's get back to the crucial work reducing the price we pay for our civilized society and lessening Philadelphia taxes' power to destroy. 

Brett Mandel is a public policy activst and a former Deputy City Controller.