{"id":945,"date":"2006-03-07T10:59:32","date_gmt":"2006-03-07T04:59:32","guid":{"rendered":"http:\/\/blog.stier.net\/?p=945"},"modified":"2011-07-23T22:05:53","modified_gmt":"2011-07-23T22:05:53","slug":"alternate-paths-to-economic-growth","status":"publish","type":"post","link":"https:\/\/marcstier.com\/blog2\/?p=945","title":{"rendered":"Alternate Paths to Economic Growth"},"content":{"rendered":"

Last week there was another go round about the Business Privilege Tax (BPT) at a City Council hearing at which I testified on behalf of One Philadelphia. Most of the people who testified had done so before. They, and the council members who were there, seemed to know each other’s lines so well that they could repeat them in their sleep. But it has taken me a while to get my head around the various issues concerning taxation and it was my first time attending this particular circus. I thought it might be enlightening. After all, as the ad goes, if you haven’t seen it before, it is new to you.
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Unfortunately, it wasn’t really new to me or terribly enlightening.
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The problem with these hearings about the BPT, and with the whole debate about taxes in the city, is that it is terribly one dimensional. Taxes after all are a necessary means to a variety of good ends. It seems somewhat disjointed, then, to be spending so much time talking about taxation instead of talking about the ends taxation\u2014or the reduction of taxation\u2014are supposed to bring about.
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This one dimensional focus is particularly problematic because the good end that tax reform is supposed to bring about is economic development and job growth in the city. Now, I very much want to see our local economy expand, especially in the neighborhoods. It is critical to improving the lives of Philadelphians that we restore our commercial corridors and industrial areas and thereby bring jobs, as well as goods and services, to people in our most distressed neighborhoods. The trouble, however, is that if this is one’s goal, it is by no means obvious that the first place to start in attaining it is to reduce the BPT.
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Suppose that, instead of starting with the means\u2014taxation\u2014we started with the end\u2014economic development. What kind of public policies would stimulate economic growth in the city? Here is a brief list (This is just a sampling. I am going expand this list and give some details on some of them over the next few weeks.)
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1. Encouraging the rehabilitation of commercial corridors through community based economic development strategies.<\/strong> Investment in streetscape improvements of various kinds and support for new businesses\u2014including aid in the creation of business plans, grants for fa\u00e7ade improvements, and low interest capital loans\u2014and the development of new affordable housing has stimulated economic development in parts of Philadelphia and, to a much greater extent, in other cities. Some of the best work of this kind has been done by Community Development Corporations (CDCs) that are responsible to the community. Yet our city does not provide sufficient support to most of our CDCs, nor does it make sure that city funds are directed to those CDCs that produce tangible results.
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2. Insuring Equal Access to Capital. <\/strong>Councilman Wilson Goode has been especially aggressive in pointing out that the banks that hold city funds have an unequal and not particularly impressive record of providing capital to African Americans and women. (He has been very good on supporting CDCs as well.) In a city in which a majority of the population is black and a majority is also female, is it any wonder that small business startups are not where they should be?
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3. Eliminate Red Tape.<\/strong> Talk to someone who has started a business in Philadelphia recently and ask them to tell you about their experience. But don’t do it unless you have an hour or so to spare or if you don’t like to hear people complain. A friend of mine with a Ph.D. recently started a consulting business in Center City. He told me that he finds it hard to understand how anyone, without an advanced degree, can figure out how to meet all the arcane paper work requirements that lead applicants to go from one office to another and back again for days at a time. Can’t we reengineer and simplify this process? Or, if not, can’t we appoint case managers to help business people wend their way through the bureaucracy?
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4. Improve the schools. <\/strong>Without good schools, where will new businesses get their workers? How will our citizens make enough money to support new businesses?
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5. Property Tax Reform.<\/strong> Now we come to taxation. Of all the taxes that need reform, I would put property tax first if for no other reason than this: Economic development is going to lead to an increase in the value of property in the city. (That is how the supply side effect of cutting the BPT is supposed to work.) If we want to insure that new development is not choked by opposition to increasing real estate taxes, we need to reform our property taxes and make sure we allow the people who have lived through the bad times in our neighborhoods to enjoy the good times.
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6. Keep the Cohen Tax Credit.<\/strong> The last major piece of legislation Councilman David Cohen pushed through City Council was a credit, to be phased in between 2010 and 2016 that reduces taxes for low income workers. (A progressive revision of the wage tax would be better but would violate the state constitution.) This legislation is not just important as a matter of equity, it is critical to the rebirth of commercial corridors in our most distressed neighborhoods. If we want new businesses to succeed, it helps to make sure that consumers have money to spend at them. Yet Mayor Street wants to eliminate the Cohen Tax Credit and invest in commercial corridors. As my mother would say, go figure.
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7. Business Privilege Tax Cuts. <\/strong>Finally we come to reductions in the BPT. For reasons I will discuss another time, I think the BPT is a lousy tax from a progressive point of view. And I also believe that reducing it will encourage new business growth, although I don’t think this will happen as quickly as the Chamber of Commerce does. But why not focus these reductions where they will do the most good, on small businesses instead of providing a major tax break for large corporations like Comcast, Sunoco, and Wal-Mart that already pay very little. Moreover it is one thing to support tax reform, and another to cut $300 million in city revenues when we need those revenues to fund other economic development strategies, not to mention to deal with the pension and health care costs of our retirees, and to restore funding to other under-funded city services, especially our parks and libraries. I support dramatically reducing the BPT especially for small businesses, but not if we decimate the city budget.
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How To Pay for Targeted Tax Reductions <\/strong>
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There is one excellent idea the tax reform commission considered but ultimately did not adopt because they did not have all the data they needed to analyze it fully: converting our wage and net profit taxes into an integrated personal income tax that taxes dividends and interest as well as wages and the profits of unincorporated businesses. A personal income tax would be a much more progressive tax than the taxes it replaces. And it is a much better way to tax capital than the BPT. Switching to a personal income tax might bring in another $35 to 50 million, even if we include a tax credit for low income workers.
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This additional revenue will allow for targeted BPT reductions. And then, as gambling revenues come in, I would split it two ways, for further reductions in the personal income tax and the BPT and for the kinds of investments in economic growth I described above.
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An Economic Development Commission<\/strong>
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One of the reasons we have focused so much on tax reform to the exclusion of other ways to encourage economic growth and jobs is that a few years ago we created a commission that looked at taxes and nothing else. As the old saying goes, if the only tool you have is a hammer, then everything looks like a nail. Similarly, if the only tool you have to improve the economy is reducing taxes, then it seems obvious that reducing the BPT is imperative. But there are other tools that will lead to economic development in the city. Any sensible path to economic growth will use all the tools in our tool box. And any just path to economic growth will focus on those tools that increase rather than diminish economic equity.
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So perhaps it is time for another commission, one that will examine all the tools we might use to make our city a more prosperous, just, and livable place.
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Last week there was another go round about the Business Privilege Tax (BPT) at a City Council hearing at which I testified on behalf of One Philadelphia. Most of the people who testified had done so before. They, and the council members who were there, seemed to know each other’s lines so well that they could repeat them in their sleep. But it has taken me a while to get my head around the various issues concerning taxation and it was my first time attending this particular circus. I thought it might be enlightening. After all, as the ad goes, if you haven’t seen it before, it is new to you. Unfortunately, it wasn’t really new to me or terribly enlightening. The problem with these hearings about the BPT, and with the whole debate about taxes in the city, is that it is terribly one dimensional. Taxes after all are\u2026 Continue reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[40,57,16,21,65,28],"tags":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p35YuU-ff","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/945"}],"collection":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=945"}],"version-history":[{"count":2,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/945\/revisions"}],"predecessor-version":[{"id":7069,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/945\/revisions\/7069"}],"wp:attachment":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=945"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=945"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=945"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}