PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact

By Michael Wood, Third and State

With a strong December showing, the commonwealth now has a General Fund revenue surplus of $171 million (1.4% above estimate) for the first half of the 2012-13 fiscal year, double the Corbett administration’s revised estimate for the entire fiscal year. The strong December collections exceeded estimate by $112 million (or 4.8%).

The increased revenue is a good sign of a modestly recovering national economy and a brightening of the state’s fiscal picture going into the 2013-14 budget season. This is a nice change from previous years when midyear shortfalls triggered cuts to state services.

In December, personal income, corporate, and realty transfer taxes exceeded revenue targets by 10.1%, with sales, inheritance and other taxes (on cigarettes, alcohol, and table games) falling short of expectations by 2.8%.  

A similar picture exists over the first half of 2012-13 — corporate, personal income and realty transfer tax collections are a combined 5% higher than expected, while sales, inheritance, and other taxes have fallen 2.4% short of budget estimates.

One area of concern is that sales tax collections (the state’s second largest tax source) are $125 million, or 2.7%, lower than projected. It is not clear the reason for this as vehicle sales and consumer spending have been increasing. Perhaps the new tax collections from some online retailers may not be as large as anticipated.

Compared to last year, collections are $583 million, or 5%, higher, with corporate ($254 million) and personal income tax ($186 million) collections making up most of the increase in 2012-13.

There's no Fiscal Cliff; It's An Income Cliff

While the national focus is on a make-believe deficit “crisis”, Philadelphia is facing an all too real income crisis. Too many families, including many with at least one full time worker, simply can’t meet their basic needs.

Of course our entire State includes huge numbers of struggling families, 840,000 families to be exact, including 2.3 million individuals, according to a recent study by Pathways PA. But Philly is tops in “income inadequacy” with 42% of our entire population not able to meet basic needs such as housing, child care, food, health care and taxes. Yes, the poor and the marginally poor do pay taxes.

During the Presidential campaign, the problems of these folks, and the cities like Philadelphia that are home to so many of them, fell off the cliff. Instead another cliff engendered all the conversation, and continues to, the so-called “fiscal cliff.”

The fiscal cliff is what we’re all supposed to fall off of if Congress doesn’t act on tax and budget policies by midnight on December 31. At that point all the Bush tax cuts will expire and massive budget cuts will take place. All of this because both parties have been laser-focused for two years on the need to cut deficits, and to that end have created their very own emergency to force themselves to act.

But as Paul Krugman repeatedly points out, there is no deficit crisis. We need no spending cuts (except in the bloated Defense Department budget.) We are told that deficits are threatening to create uncontrollable inflation and sky high interest rates. But the reality is that as deficits have grown, interest rates and inflation have fallen. The only real deficit is the income deficit.

Time to Tell Toomey: Jobs, Not Cuts

The resolution of the debt crisis last week was a travesty. This was a crisis forced on us by Republicans who held the entire country hostage to their single-minded determination to keep taxes low on the rich. Unfortunately the Democrats bowed to many of the teabag Republican demands, and so now while millions of Americans are jobless, the federal government will be cutting spending. As Paul Krugman has so clearly pointed out, that is the exact wrong thing to be doing at a time like this. We MUST fight back.

One of the masterminds behind the Republican hostage-taking strategy is our own Senator Pat Toomey. Neighborhood Networks and MoveOn.org will be collaborating next Wednesday at noon to take the message to Senator Toomey that his mindless and immoral catering to the richest 1% of the people of this country is unacceptable. Please go here to sign up for this event. Or, if you're on Facebook, sign up here.

Out of adversity often comes progress. It is important news that NN and MoveOn are working together on this event. Many of you will remember that Neighborhood Networks was born out of a previous MoveOn campaign more than 6 years ago. For a variety of reasons it has been difficult for the two organizations to collaborate over the intervening years. But with everyone recognizing the strength of the right wing assault on basic progressive values, many of us are working harder than ever to bring the left together. That’s why both NN and MoveOn are part of the American Dream movement led nationally by Van Jones. And that’s why we are now working together at the local level as well.

Getting strategic on Budgets

There are two great coalitions around that are working on City and State budget issues, both with much the same name. There's CES which stands simply for the Coalition for Essential Services. That group is focused on City budget issues. Then there's SEPCES which is the Southeast PA Coalition for Essential Services. Both of these were somewhat successful last year in preventing the worst of proposed City and State budget cuts from being implemented. But, as most of you know, substantial cuts were still made. More State budget cuts were made just a week or so ago by Governor Rendell.

The battle is about to stop even deeper cuts in an environment of shrinking revenue. Here are two ideas for improving how those of us involved with the coalitions might improve our lobbying this year and into the future.

Land Value Tax Discussion This Saturday, 9/26

LVT and AXI in Philadelphia: Saturday Discussion
Tax policy by the numbers and with a philosophy.

The 2009 budget crisis in Philadelphia came down to the wire. How could it have been avoided? By implementing a progressive form of land value taxation, a self-generated fiscal solution can be in the cards, without overly-burdening working and poor residents. Urbantools staff will demonstrate how with blazing graphics and a gripping narrative! Find out why Councilwoman Quinones-Sanchez, amongst others, has asked for full study of land based taxation.

All are welcome. When someone tells you that the money's not there for essential city services, you can have an answer at hand. Come on down, tell us what you think and give us a chance to make our case.

When: Sep 26, 2009 from 10:00 am to 11:30 am
Where Henry George School, 413 South 10th Street, Philadelphia, PA 19147
Contact Name: Barbara Maloney (RSVP if you can)
Contact Phone: 215-923-7800
Attendees: The Public

Mr. Nutter Goes to Harrisburg

It's Our Money's Ben Waxman had a nice set of factors that might make the sales tax hike get accepted in Harrisburg called "Selling the Sales Tax," including my favorite weird rationale that started with Mrs. Verna: the higher rate will help business elsewhere.

Who thinks this will pass? Why do people think the silence has been deafening on this phase of the process? And hey, Ben, who the heck is CleanUpPhilly?

Where do we go from here? Down to the lake I fear.

For the record this is my screed on the sales tax issue right now.

The question unasked in all of this is: How in the face of declining receipts at a 7% rate, will more revenue get collected at a higher 8%? State-wide, receipts from the sales tax dropped $100 million below estimate, to about $600 million. In Philly itself the decline is 6.7%.

Council Budget Testimony: all should show up if they can

The Henry George Foundation signed up yesterday and submitted testimony. Our plan is to help bridge the gap between the Mayor and the council's competing proposals. With less than two weeks to go, many ideas are floating, but no common ground has been achieved. We proposed combing the sales tax increase with LVT using the current BRT assessments, thereby changing - albeit modestly - the sales tax increase into a "tax on foreigners living abroad". We got a lot of questions, and had the data broken out by District and then city-wide.

Council was disappointed at the lack of attendance, but at least we had the luxury of being asked in-depth questions and a request to the chair by Councilman Green for a fuller study was accepted by CP Verna.

Helen Gym gave a sharp and persuasive presentation on BRT employees skulking in School District corridors. Helen's command of the subject impressed many.

Recurrent Crises: Budgets

A new day, and a new way and an old crisis. I am sure we've all noticed that Philadelphia's budget problems reoccur every 10 years or so, no matter who is at the helm. A rethink of what should be taxed and how taxed must be at the heart of any and future current debates and policy.

Every crisis puts the most vulnerable programs and people at risk. Why them? Well, they don't have a constituency and advocates with ideas that move beyond traditional nostrums.

How about this idea. Just for thought then action?

Philadelphia's Budget: Everyone's Right

Mayor Nutter’s announcement of today is understandable, yet also avoidable. Understandable because the traditional reaction to an economic downturn in government is to cut services, lay off workers and rethink taxes. Avoidable because all options should be on the table, but are clearly not.

The Budget Issue is Not about Nutter, it's about Nutter's Choices

I've been wrestling with the Mayor's new budget for a few days now. One thing I've figured out; it's not right to think about it in terms of what should reasonably be expected from Michael Nutter. In that framework I might be relatively pleased; when he was a Council member he worked hard to abolish the Business Privilege Tax in toto; now he proposes abolishing "only" the Gross Receipts part. Furthermore, he proposes to cut the rate of the Net Income portion of the BPT just 7%. Neither the Gross Receipts abolition, nor the Net Income cut is immediate; they would both be phased in over a period of years. And Nutter is also proposing an immediate 25% increase in the Parking Tax -- a relatively progressive tax -- which will make up a substantial part of the lost BPT revenue.

So as someone who thinks cutting business taxes should be a very low priority, if one at all, I could feel OK about all this compared to what might have been.

But personalizing the budget proposal is the wrong approach. The important question is not how to grade Nutter. The important question is this: are the choices the Mayor made in the budget the right ones for our City? My answer to that has got to be no.

Rx4PA: House Bill 2098 would do for Pennsylvania what Medicare has done for everyone

The Pennsylvania AFL-CIO is pressing legislators to pass HB 2098, a bill submitted on December 6th and sitting before the House Insurance Committee (authored by its chair, Rep. DeLuca). We were all a little disappointed earlier this year when the legislative process failed to make good on Governor Rendell's plan to allow our insurers to quit paying for infections and mistakes made by Hospitals. Then, the next thing we knew, Medicare (by far the biggest spender in Healthcare) came along and said it wasn't going to pay for those mistakes or infections starting late in 2008, anyway. Which could have nearly the same effect, so HB 2098 seeks to give our Pennsylvania insurers that same right: to refuse to pay bills for procedures correcting conditions that hospitals should have prevented.

"But wait! I thought we already solved this problem?" you ask. Sure you do. We did something about it, but we sure didn't solve it. In fact, in one very important way, we took a step backward. A big step. Click Read More to see what I mean!

Go, Inqy, Go! - Political contributions and the Parking Authority

I love the way THE INQUIRER is pounding the quote-unquote "Philadelphia" Parking Authority. City GOP benefits from Parking Authority. It needs it. The story starts off promisingly:

Though the Philadelphia Parking Authority has fallen short in its promised funding for city schools, it certainly has been a boon for the Philadelphia Republican Party.

Authority employees and consultants have contributed at least $214,000 to the Republican City Committee since 2001, according to an Inquirer analysis of campaign finance data.

The contributions this year have reached at least $33,210, or more than 14 percent of the party's total.

I wonder if that's the single biggest cadre of funders? Of course, "cadre of funders" gets hard to define for a newspaper article, but still I wonder.

My humble suggestion to Philadelphia reporters pursuing these questions: the story I'd like to see is some attempt to sort out how much money could, potentially, be going to schools and how, exactly, the law designates that they are supposed to determine that figure.

This schools issue is a big part of why I want to lambast the PPA so badly. If it were just an issue of over-spending and patronage, I would care but I wouldn't care as much. The simple fact is that the PPA is making our city harder to live in by tightening up parking rules, but they aren't delivering on the promised benefit of that: getting some more money into education.

Pound them, Inqy! Pound them!!!

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