- 'An End to the Southern Strategy, But No Post-Racial America' says David Love
- "A Question of Place": An essay on the power of community
- Just Equally Speaking….
- Eagles owe Philadelphia the 8 million it needs to keep libraries open
- who would like to see Verizon offer cable TV in Phila?
- Council Committee Passed the Freeze
- Carol Campbell Passes Away
- My first trip to the public library
- Fight digital exclusion
- What if half of Philadelphia didn't have roads?
Who's afraid of Michael Nutter?
Submitted by mcarroll on Sat, 12/09/2006 - 1:08pm.
Some background: I'm a returnee to Philadelphia after a 15 year stint on the West Coast. I live in the northwest but not in Nutters district. I'm still getting my bearings on the political landscape.
I recognize politics is a contact sport, but to be honest, from what I know about Michael Nutter's ideas on taxation, crime, education -- and what I have seen work in other places -- the disdain for the guy confuses me. Looking around the country he seems like a garden variety Clinton-Democrat to me. Can people fill me in on what the deal is here? I suspect this boils down to differences of philosophy on the gross-reciepts tax but I'd like to know where people are coming from in any case.
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nutter's ideas not "approved"
I agree with your thoughts on Nutter.
However, the founders, moderators and most frequent posters on this blog - to whom, by the way, I am so thankful for creating this forum - jump down the throats of anyone who suggests that Philadelphia's excessively high wage and business taxes have contributed to the city's 50 year trend of disinvestment, job loss and population exodus.
Nutter makes the mistake of violating this site's unstated assumption that "any proposal of cutting or changing tax structures is clearly a tool of corporate and Republican interests designed to further damage the poor and working classes".
I think Nutter's policy ideas are head and shoulders above the rest of the mayoral field at this point. But he - or anyone else who adopts similar positions - will never be met by anything other than disdain and shout-downs on these pages.
And the loss of jobs and citizens goes on unabated. And the poor continue to suffer from bad government, high crime rates, lack of economic opportunity, and the paralyzing cycle of poverty.
But hey, we can call ourselves "progressive" because we stand up to the evil tax-cutters like Nutter, and that's more important anyway.
You're right - Nutter's a smart guy
From what I can tell, many people who don’t like Mike Nutter dislike him because of his views on tax and economic policy. He is against the business privilege tax and many of his ideas focus on economic development in the city. Some people are under the impression that the city cannot cut taxes and continue to provide services for the excessive number of poor here. However, I think these individuals fail to recognize two things: (1) that value added tax cuts will not diminish the city’s ability to provide services, and (2) the city needs businesses not only for the jobs they provide, but for the positive byproducts they bring.
Also, as you pointed out in your blog post, we don’t necessarily need to reinvent the wheel here – many of Philadelphia’s problems are not unique and we should begin to look at how other cities have addressed them. Nutter has promoted some good ideas and those ideas have worked in other cities. Politics is about dialog and we should vet the ideas of all of the candidate thoroughly, but I believe Nutter gets a lot of flack from people who haven’t done their research.
On Nutter
Nutter came in a talked to a class a couple weeks ago, and I was pretty impressed, particularly because of the bad mouthing he often gets here. The usual shot he takes is being in the pocket of business to the detriment of the poor. But even reading the responses to this post, people keep stating why reducing the BPT and wage tax are good ideas, they just keep coming to a different conclusion than me.
I'll try to avoid the place based, supply side song and dance. That argument is a non starter on this site. What I will say is that it is 100% true that we are not NYC. When was the last time you heard a CEO say they chose Philly because of its agglomeration advantages? Location decisions affect Philadelphia. Nutter's favorite example was to look at City line. The Philly side of the street is run down, while the suburban side is razzle dazzle. Dan, you're absolutely right when you say that education should come first. Giving kids a well paying honest alternative to crime keeps them off the streets, and this starts with education. After education comes jobs. If the city doesn't keep its jobs, crime goes up, people leave. The problem, however, is a lot deeper than just reducing the wage tax. It starts by having some effective, transparent leadership in City Hall. \
Also, people want the quick fix, and the prospect of solving crime by reducing a tax on business seems unfair to a lot of people, particularly when people think it could reduce services. Even so, the gross receipts tax is a STUPID idea, and the wage tax discourages people from living in the City.
Nutter has issues too. EX: he is not a very political politician, which is good for governance, but bad for elections. I do think he has some good ideas, and I think the way he can get shit on here is unfortunate.
There's that elephant again
"Since one side of City Avenue is in the same geographical location as the other with the only real differences being different local government units and tax structures, those factors have to be the key reasons why businesses locate on the suburban side and why the office buildings were built there."
Have you ever walked across City Avenue from the City into the suburbs? Assuming that you don't have the ability to see tax structures, what did you notice during your walk?
Ever seen the movie "Brother From Another Planet?" There's a classic scene when a guy performs a magic trick as he rides the NY subway into Harlem. He makes all the white people "disappear."
Look, there's a lot of good information in your post - quite a bit to digest that's relevant to the issue. But when someone writes comments that don't account for how race and social issues are a fundamental component of "business growth," then I find it hard to concentrate on what they have to say.
Do you seriously think that businesses evaluating two similar potential locations on either side of City Avenue wouldn't factor in the wealth (and correspondingly, the race) of the residents in the surrounding community?
So, you are creating a false dichotomy when you try to isolate the residential and commercial factors. The point is that you need to create drivers for people with money to reside in the city - accordingly, crime and education are probably still the most important issues.
Sorry, bub. But, since you
Sorry, bub.
But, since you called me out (the founder) of this blog, let me just say a few things:
1) Read the archives of the blog at the old site (youngphillypolitics.blogspot.com), or the ones over the last year from here, and, your characterization is simply false. I stated out with no real opinion about the BPT, and then moved over into the "its stupid" camp, when every time someone would make factual arguments, the BPTers would basically say "why are you with the terrorists," and would ignore facts, and not answer them.
2) About Nutter specifically, read what I have written. I have not exactly been a terror. Google, for example, a "conversation on michael nutter."
3) No one says taxes cannot be changed. But, thats not what the BPT is about: it is about tax cuts. I know he says he is for other econ development strategies, but, no matter what you say about economic growth, and no matter what magic the BPT brings- no one will even admit that in any way can it be revenue neutral. If you tell me that you will make a change to how we tax businesses that is revenue neutral in year 1, and any future tax cuts are dependent on real, sustained growth, I might listen. But otherwise, it is silly.
4) A hell of a lot of things go into business location, as has been said over and over. Taxes are simply low on that list. If you disagree, please examine the marginal tax rates of NYC vs. Detroit vs. DC vs. Pittsburgh. Ask Bloomberg what he thinks of the BPT argument for small businesses. I believe Ben quoted him saying something to the effect of "if you are that close to the margin, you need a new model."
5) The Chamber of Commerce is generally one of the more regressive organizations around. They do not go for things, like say, a minimum wage increase, workplace safety, etc. Yet, on the day before they vote, Nutter and others took $1,000 checks from them. Doesn't that seem a little effed up?
Anyway, I could go on I suppose. I have no vendetta against Nutter. But, the BPT argument to me is 100 percent hot air at this point.
Business Concerns are Different from Residents' Concerns
Business owners and decision makers have different concerns and priorities than residents. Businesses focus on location in terms of what will attract good qualified employees and where they are in location to their customers and vendors. Recognizing that if a non-retail business is in Center City or Bala Cynwyd that they will be able to draw from the same labor pool and attract virtually the same customers and vendors, the issues become focused on a second level of issues which include taxes, lack of aggravation from or ease of working with local government, amenities for employees, and where the CEO/decision makers want to locate (which is heavily impacted by wanting to work in close proximity to where they live).
While it can be argued that locational decisions that are made based on tax rates are short-sighted, this does happen. The issue with City Avenue and the fact that nearly all of the office buildings are on the Bala Cynwyd side is real and occurred for location based decisions that business people made. Since one side of City Avenue is in the same geographical location as the other with the only real differences being different local government units and tax structures, those factors have to be the key reasons why businesses locate on the suburban side and why the office buildings were built there.
The key issues for Philadelphia residents are education and crime. Businesses generally do not worry about local education; and the type of crime that impacts office based businesses is generally different than those that occur in residential neighborhoods. For example nearly all of the homicides in Philadelphia this year occurred in residential neighborhoods outside of Center City and nearly all did not involve employees while they were at work or going to or from work. Crimes that impact office based businesses tend to be things that do not physically harm the victim, such as theft of possessions (e.g. a pocketbook or laptop computer from an empty office or a parked car. If Philadelphia schools are bad and underperforming it is a problem, but not one that local office based businesses will tend to worry about as their children will tend to not to go to Philadelphia public schools and they can attract their future workers from elsewhere in the region.
Businesses leaders who live in the suburbs and work in or are considering working in Philadelphia also feel shut out of the process by the Sterling Act (which provides for the Philadelphia wage tax to be paid by suburbanites who work in Philadelphia), and believe that they have no real say in the governance of Philadelphia despite paying the wage tax and business taxes. This combined with the perceived dysfunctionality in many aspects of Philadelphia government compared to suburban governments (e.g. permitting process); the regressive business tax structure compared to the suburbs (e.g. business privilege tax and gross receipts tax); and the cost of parking in Center City versus free parking in the suburbs make Philadelphia a much harder sell for businesses than the suburbs. The amount of employment in Philadelphia and the amount of new office construction in Philadelphia compared to the suburbs over the past 30 plus years clearly show that Philadelphia is loosing jobs to the suburbs.
Philadelphia businesses also subsidize Philadelphia residents by the Sterling Act, the regressive business taxes, and the fact that the Philadelphia real estate tax is kept artificially low so as to reward property owners (most of whom are residential property owners) and the lost revenue is made up by higher business taxes including the wage tax. This is actually the correct simple political policy solution in that having a higher tax burden on businesses and their employees, many of who do not live or vote Philadelphia makes it easier on politicians. It is the wrong solution in that it lessens business development and growth in Philadelphia and ironically businesses need far less municipal services than residents require (e.g. unless the business people also live in Philadelphia (in which case they are paying residential based taxes), businesses do not send their children to public schools, and they tend to be required to provide for their own trash removal).
Making Philadelphia more attractive to businesses by changing tax policy and how government responds to business (e.g. permitting process) are key to Philadelphia’s growth. If it can be legitimately argued that changing the policies will lead to job growth, the increased jobs and tax revenue can offset and exceed existing tax revenue and the ancillary benefits (e.g. more retail associated with offices, new office construction, more jobs for Philadelphia residents) and the lower demand for municipal services required by businesses it is a win for the City and its residents.
There is No Wall on City Avenue
Obviously there are demographic differences between Philadelphia and Lower Merion. However, those differences have no real impact on City Avenue in terms of why the office buildings are on the Lower Merion side. We are talking about differnt sides of the same street. There is no wall on City Avenue and believe it or not African Americans do cross City Avenue from Philadelphia to Lower Merion and white people from Lower Merion cross City Avenue to go to Philadelphia. Any issues with race or demographics in Lower Merion cannot provide a meaningful explanation as to why the office building are on the suburban side. I myself have walked accross City Avenue many times. If there was a significant office building on the Philadelphia side of City Avenue, businesses would not locate there not due to any concerns about race or demographics, but because of tax policies and the delivery of local government services.
I appreciate the John Sayles reference, while it is cute what does it mean in real life, that there are some areas that have predominant African American populations and that some whites are afraid to go to those areas? That of course is accurate. However, one side of City Avenue is 100 feet from the other side. I am not talking about Ardmore and Mantua. It is not going the same as traveling from Wall Street to Harlem circa 1984.
Also, I am not an elephant, I am a Paul Tsongas Democrat.
Nutter is a corporate tool, but . . .
I've met Nutter's policy ideas with something other than "disdain and shout-downs", with a progressive alternative, one that doesn't give to the rich in order to save the poor. (That's not sarcasm, that's almost literally what you said when you suggested that without elimininating the BPT -- the centerpiece of Nutter's tax program -- we will continue to "suffer from bad government, high crime rates, . . . and the paralyzing cycle of poverty.") See my blog post with a list of alternatives at http://www.youngphillypolitics.com/node/1926.
REAL Tax Reform is a Progressive Idea
Real tax reform is a progressive idea. Eliminating business taxes is . . . eliminating business taxes. Throwing the word "reform" on it is just spin. Stay tuned. Tomorrow I intend to put up some ideas for real reform; that is fixing what's broken. The baby will not be thrown out with the bath water.
Apples and oranges
Dan, your argument fails because we not New York (not even close). So comparing our tax policies to theirs is pointless. Taxes will of course be a low consideration in a place like New York, where much of the economy is skewed by the city's luxurious lifestyle and population density. But in meat and potatoes Philly, little expenses like taxes will take a bigger bite out of a small business’ budget. Even comparing DC is like comparing apples and oranges, just because of the high income level of the residents in the metro area and because business can't go anywhere - it's the capitol. Not to mention the fact that DC and NYC have different economies than the three rust-belt examples you provided. But for Detroit, Pittsburg and Philly, businesses and people can leave, and they have. If anything, you’re analysis is more of a reason to cut taxes.
Philly's taxes are simply too high. Even the wage tax is overly burdensome. I don't know if you work, but when your only income is your paycheck, you tend to notice what's being taken out.
Let's just get rid of people and only have business in the city
The City Line argument relates to a small group of businesses that are the exception rather than the rule; there are also businesses in the City in a variety of Business Improvement Districts that volunteer to pay higher taxes, remain in the City and get improved services. Does that prove that we ought to increase business taxes everywhere?
I find it fascinating that people who call themselves "progressive" (which I assume includes everyone who posts on this site if they do so in good faith) can casually disregard the needs of suffering people by merely noting that business doesn't care. So we don't need to worry about poor education, we don't need to worry about crime because these problems don't hurt business. Therefore, the implication goes, we can do whatever business wants and let the consequences to residents be whatever they are. The heartlessness of it boggles.
We ought to make changes in business taxes; just not the simple-minded ones touted by Nutter. Shifting the burden to the real estate tax is just a prescription for throwing thousands of poor, struggling homeowners on the street. And City Council will never tolerate it, mainly because of organized opposition from wealthy homeowners, as proven by the near revolt the last time there was a major reassessment.
What we need is a progressive tax system that is not put in place because of arcane economic theory, but because it's fair, and, as fair, will be accepted by the public as an appropriate way to fund the government.
Btw, the City's BPT collections have been exploding. How is that happening with all the businesses running out of town? Are the only ones remaining the ones with stupid CEO's?
Wrong elephant
Most importantly: I was talking about the 500 lb elephant that no one want to discuss - racial issues, not suggesting that you're a Republican.
"If there was a significant office building on the Philadelphia side of City Avenue, businesses would not locate there not due to any concerns about race or demographics, but because of tax policies and the delivery of local government services."
I have to say it boggles my mind that you think that race, and correspondingly, the economic demographics of the residents in the respective communities, would not enter into play for a business deciding whether to locate on one side of City Avenue or the other.
I lived in Winfield many, many years ago. My parents sold their their house to a black family. Our neighbors made angry phone calls us - just before they decided to move to the suburbs.
I lived in East Mt. Airy after that. I watched the neighborhood near Cheltenham Avenue go from predominantly white to predominantly black in what seemed like a matter of weeks.
Guess what, as the whites fled those neighborhoods, so did the businesses. When I take a walk along Wadsworth Street near Cheltenham Avenue, I don't recognize one business from 30 years ago.
And as those neighborhoods and others changed in racial makeup - so did the economic demographics of the City as a whole.
Somehow, I don't think that the businesses that left did so because of tax structures.
Again, I think you raise some good points - but I still think you're leaving out huge issues by elevating tax structures as the primary factor for businesses deciding whether to locate in the City or the nearby suburbs.
Huh? OK, you don't like DC.
Huh? OK, you don't like DC. How about Baltimore? They are in that same metro area, they have low taxes (I believe), and they have an incredible amount of poverty. Some how, some way, the tax rate did not solve the much more complicated problem that too many people have boiled down into some simplistic answer of "taxes!".
For large businesses making decisions on where to locate, a report from Brookings (not exactly radicals) said this:
They basically say that taxes only matter if everything else is perfectly equal, and that priority for Cities should be "Education, Education, Education," and "Speeding-Up the Permitting Process and Simplifying Bureaucracy."
For small businesses, there are a hell of a lot of things that go into their success and failure. And, again, while the BPT may be annoying, a successful small business will not live or die based on its existence. If you think the BPT is regressive, show me a revenue neutral way you want to change it. But, please, cutting it does not magically solve Philly's problems.
Then you said, this:
Let's go to the graph:
Lower taxes is number ten on things people care about when making community choice? Again, we could go through this over and over, but not only can you look at this survey, but, take a drive to Lower Merion, and ask people what their real estate (school) tax is. People will pay- they simply want results. And, people are more concerned about a lot more things than taxes.
City Avenue is the Case Study
City Avenue does not just relate to a small group of businesses. It is the case study as to why some businesses locate in the suburbs instead of the city. Also, it is not that businesses do not care about poor people, they care about their business which is their mission and reason for being. Many business people care about poor people, but in their context as the business people being citizens not as being business people. I am not saying it is right, I am stating how I believe businesses operate and where their concerns are. My point about the real estate tax being artificially low was that it was a policy decision that had been chosen by the City. Raising real estate taxes should be considered as an option and the impact on residents should be considered. Offsets, such as lowering the wage tax (which would benefit many residential property owners) could then occur.
Businesses that are located in a business improvement district are not paying a tax, they are paying a mandatory fee they voluntarily imposed upon themselves for services that stays in their back yard, and does not go across town for an area that is not located where the business or their interests are located. Most importantly to businesses, the money paid to a business improvement district does not go into the City’s coffers.
I'd love a progressive tax policy in Philadelphia, but the only real way of doing that is to get rid of the uniformity clause in the PA constitution. Also, progressive should not uniformly mean at the expense of punishing businesses and dramatically slowing job growth and lowering tax revenues from businesses due to the lack of businesses and jobs resulting from tax policies.
My Point Was Office Based Businesses
My initial post referred to office based businesses, and I noted as such throughout the post. Neighborhood based retail businesses (storefronts) are another issue. I agree that neighborhood storefront businesses follow the flight patterns when a neighborhood changes demographics. This is connected to the residential flight and the fact that the residents who have fled will find retail alternatives in their new neighborhood so the retail businesses in the old neighborhood no longer have their old customers; the sense of fear and the fear of change, and also historically the owners of the old neighborhood businesses were often times also residents of the old neighborhood until they fled from their houses.
Offices and white collar jobs are a totally different type of business. They have different customer types, tend to be increasingly based on information and not on goods, and attract a different type of worker, usually with more education and with a higher income. These businesses also are increasingly able to locate in a wide-range of areas due to changes in technology and communication.
Back to City Avenue, while there was residential flight in Wynnefield, it did not significantly impact the office buildings on City Avenue in terms of flight or changing demographics or significant changes in rent or vacancy rates. This is due to a range of factors, including the fact that the businesses viewed City Avenue as still being a desirable location (mostly due to its location and positive tax implications) and that the office buildings are located across the street from Philadelphia, and the fact that offices by their vertical design relate to the street differently and are impacted in a much different way than storefront businesses are when a neighborhood changes.
Finally City Avenue is more or less an Edge City. It is generally disconnected from the residential neighborhoods off of City Avenue.
Baltimore's not doing too bad
Actually, Baltimore’s economic outlook is improving. Baltimore implemented a growth strategy focused on business development and has been providing other economic incentives for businesses, including tax cuts. The focus has been on building up the downtown area and promoting the hospitality trades. Anyone who has been to Baltimore recently can tell you that a lot has changed. The city's middle class population loss has declined to almost zero in the last two years, a trend Philadelphia should follow. And Baltimore is adding jobs. Most analysts note, however, that the city’s economic prospects would improve even more if it focused on human capital development as much as business development. Nevertheless, the city's economy is improving, despite its astronomically high crime rate and abysmal school system. This improvement is at least arguably due to its focus on business development.
As far as whether people care about taxes, you are working in a glass half empty mind-frame. Is it that people care so little about taxes that it is at the bottom of their top ten concerns, or that taxes are important enough that they are usually cited as one of people's top ten concerns? I am not saying people are crying out for lower taxes. I am saying taxes are a concern, as your own chart points out. Actually, isn't the name of the chart something like, "factors in community choice that are considered very important"? And taxes made the top ten...I'm just saying...
Crackpot realism
I've written on this subject at length in a post I put up yesterday, so I won't unduly repeat myself here. But I'm immensely unimpressed with the argument that we should do stupid things because there are laws, like the uniformity clause, that stand in the way of doing smart things. Laws can be, and are, changed when enough people organize to change them. The far right organized for years to change the interpretation of the Equal Protection Clause so that it would be read to bar affirmative action. They've almost accomplished their goal. We also have to have the patience and persistence to fight long term for what we think is right. If we think graduated, progressive taxation is right, we don't fight for it by enacting tax "reforms" which make taxes more regressive. For instance, it seems fairly ridiculous for advocates of progressive taxation to press for across-the-board cuts in the BPT which largely would benefit huge law firms, Comcast, Walmart and Sunoco. They get millions, small businesses get peanuts. What kind of commitment to progressive taxation does pushing for that show?
so why did comcast, verizon, cigna stay?
Comcast is one of many huge office-based businesses that employs mostly service-oriented employees out of CC locations. Comcast is staying here and it's building a bigger building. Why didn't Comcast leave over tax policy?
Clarify
Not to pick on you but to clarify:
J. Young wrote:
You have or have seen numbers on middle class population loss for Baltimore in the last two years? And you have seen the same data -middle class population change- over the last two years for Philadelphia? Could you clarify?
Why Comcast Remained
First, every rule has its exceptions and nearly no rule is an absolute. Second, it is hard for a business to relocate especially for a distance (say from Center City to King of Prussia). Third, Comcast leadership including the Roberts family and David L. Cohen are major civic boosters. Fourth, they received major KIZ (PA tax) breaks. Fifth, there is a certain cachet to being in a major city, which the suburbs do not have. Sixth, many if not most of the employees at the Comcast headquarters will be white collar and/or creative class members. Seventh, while it is increasingly less pertinent, Center City is the central location in the region, and thus is more desirable in terms of attracting workers from different areas in the region as they are all traveling to a central hub. Eighth, having a massive office building anywhere near the size of the new Comcast building does not happen in this region outside of Center City Philadelphia or perhaps Wilmington. Cigna and Verizon remained for the same reasons. The more public the company (e.g. Comcast or PECO), the more likely they are not to leave the central business district.
Right, so...
If the city's strength in retaining large employers is centrality of location to transit and thus the greatest pool of taleneted workers, let's work with that. Let's improve transit and improve education so more "creative class" workers are abound.
If the business is sustainable (will be around, in Philly for a while) and there is proof that it will help raise median wages for all Philadelphains, then, yes, maybe a KOIZ is cool.
Smaller-sized companies may react slightly differently, but all in all, I am not sure the basic principles still don't apply.
Isn't that enough work to keep city and state govenment busy for at least a year, if not many?
And I guess I'll have to pound this 'til my head hurts, but . .
shouldn't we look at a comprehensive tax program which is progressive for both business and individuals, strengthens small business and neighborhoods, and makes people feel they aren't being picked on when asked to help fund the government? Or should we just talk about whether or not to repeal the BPT as if that is all there is to tax policy? If the former, check out my blog.
Not just taxes
Stan
we have had this disgareement in person as well as online (for over 2 years!)
why talk about tax policy at all when it is clearly a red herring--a trap set by the business community to keep control over their small piece of the pie--when the real issues, like using existing conomic development funds to raise wages or using the power of the state leg to create dedicated funding sources for mass transit are not on the table?
Transit, Tax Breaks, and Education for Business Attraction
Improving transit and giving tax breaks are great, however, there are several issues with these most notably that they cost serious dollars. Transit funding for new and improved infrastructure should be a key goal and we should build upon our mass transportation strengths, the problem is that there is very little incentive or support to give money from the federal, state, regional or local governments to support mass transit infrastructure; also as we know SEPTA is and has been facing operating budget shortfalls (making funding new infrastructure all the more difficult); and SEPTA has next to no credibility in terms of being perceived as spending money well or in being able to plan and execute new major projects (e.g. Schuylkill Valley Metro and how SEPTA made that project into a political non-starter). To solve this problem, a new state or region wide (multi-state) mass transportation infrastructure development agency should be created that is charged with developing new mass transportation infrastructure. They can start with the Schuylkill Valley Metro, and extending the Broad Street subway to the Navy Yard and possibly to New Jersey.
In terms of education, supporting it is great, however, from the business community perspective the nexus between supporting public education and developing the next generation of the creative class is not there. The creative class comes from colleges and universities and many of those students are imported to Philadelphia. The attitude of many people working on attracting the creative class is how to get the imported college students at Philadelphia schools to stay in Philadelphia after graduation instad of having them go home or to places like NYC.
Tax breaks are an issue because they give preferential treatment to a handful of companies and therefore place other companies at an inherit disadvantage; they generally do not help out the smaller companies that do not have the connections or resources to pursue the tax breaks; and they do not fix systematic underlying problems that cause the need to have tax breaks in the first place.
Post-college retention
The KIP study shows that although less non-native Philadelphians stay in the city post-graduation compared to Boston, far more native Philadelphians who go to college here stay here afterwards than anywhere else.
Why swim upstream? We have a natural advantage--young Philadelphians like to stay here (such as myself, Dan, Alex, Mike, Rosa, Kate, Aaron, Gaetano and many, many other regular readers and writers just here at YPP). Therefore, putting more Philadelphians in the college pipeline using federal and state programs like Upward Bound, Gear Up, Headstart, and more, not to mention holding accountable the School Reform Commission to educate children--not pay consultants to live in Chicago--sounds like the best way to create more workers that companies like Comcast will want to employee?
Why import when we could grow the best talent here? Not to mention that employing native Philadelphians in professional jobs is a rising tide lifts all boats sort of thing as newly minted middle-class kids sure can help suport lower-income parents better than any program the city could create. Kids who stay here means less need for social services for the elderly.
Local Creative Class Retention
I generally agree with you. The issue is that the KIP and creative class people have bought into the Richard Florida paradigm, which is predicated on attracting new creative class professionals from outside of your region, not in retaining/creating new creative class professionals from your area. Changing a hot paradigm is tough for people to do. That being said, the census data from 2000 clearly shows that both the Philadelphia SMSA and Pennsylvania are at the bottom of keeping college educated people between the ages of 25 and 39; in other words we have a big outward migration of young college educated people. Just another part of our rust belt and lack of immigration problem.
I am a big fan of home-grown
I am a big fan of home-grown talent and think it vital to Philadelphia's economy. Philadelphia kids, particularly neighborhood kids, stay. We have roots (friends and family) here. We need to do a better job of educating our kids.
It is sometimes offensive, as a neighborhood kid, to listen to all this talk about retaining the new comers when I can think of 10-11 friends of mine who had little or no opportunity aside from MAYBE graduating from high school and then having to dive into work. Or, better yet, kids who left college because when they graduated from a non-magnent public school, they couldn't read on a 10th grade level. Or, even better, the 50% of high school seniors in Philadelphia's schools that will not graduate from high school.
We have a resource and we do not use it. I have often said, Pennsylvania needs to realize the importance of Philadelphia as a cultural, economic and business center. For all intents and purposes, while Harrisburg is our capital, Philadelphia is its most vital town. Regardless of what commerce you have in the burbs, a booming Philly equals a booming region and state.
We Polked you in 1844; we shall Pierce you in 1852!
ELP wrote:
Really?!? You kind of strike me as more of a Franklin Pierce Democrat.
ELP wrote:
Seriously maybe ELP is from the 19th century. A very important factor in business attraction and retention is the quality of the public education system. The better the public education system the easier it is to get employees to relocate to a region. Let us also not forget that the vast majority of workers don’t have college degrees and accumulate training on the job, a capacity shaped by the public education system.
Well, well
What a surprise to find people arguing about business taxes at YPP.
"Nevertheless, the city's economy is improving, despite its astronomically high crime rate and abysmal school system. This improvement is at least arguably due to its focus on business development. "
So does that mean that you think that Philly should follow suit? Let's focus on the middle class and on improving the city's economy WITHOUT focusing on the high crime rate and abysmal school system?
I'm sure that is distoring your viewpoint, but what exactly is the point of the "half full" perspective?
I think that focusing on eliminating the BPT (which, of course, is not the same thing as focusing on business development) as way to promote economic growth is a reflection of misplaced priorities. Even if eliminating the BPT would improve Philly's economy (an assumption which remains unproven from what I've seen), that doesn't mean it is the most desireable methodology. Higher priorities should be improving education and reducing crime; there is no doubt that such efforts would improve the economy, and they would benefit more the people who are the neediest.
The problem is that eliminating the BPT is a quick fix that appeals well to voters and can be used cynically by politicans to boost their political support. We've seen that approach from Republicans forever. Of course not everyone who believes that the BPT inhibits economic growth is a Republican hack, but the fact that taxes ranked 10th on that chart is significant. It means that other needs should be addressed first.
Comcast
is here because they get a monopoly. Verizon has cut back substantially in the past few years and they are not headquarter here. They considered N. freaking Jersey more business friend.
As for Cigna, it is a bureaucratic nightmare. The company I believe is on the verge of a merger and they've cut back substantially too in the past few years.
How about citing some fast growing companies that don't have a monopoly that chose to stay here.
Mike
And the BPT raised $388 million last year
Stan Shapiro
Would someone favoring BPT elimination want to suggest how the City gets by without that money? Is that where the magical, overnight growth of non-tax paying new business comes in? Won't that happen also if I click my heels twice and wait for my fairy god-mother to appear?
Fast Growing Companies in Philadelphia?
That is part of the problem, the fast growing non monopolistic companies tend to move out of the City due to the tax structure and for other issues with the City including the problems with government processes. Add the fact that we are not a hot bed for creative class/knowledge workers and it compounds the problem.
So, again, why is collection of the BPT soaring
even though the rate of the gross receipts tax portion has been dropping drastically since the mid nineties? In 1995 the Gross Receipts portion of the BPT was set at a rate of 3.25 mills. In 2007, it will be imposed at a rate of 1.54 mills, a cut of 52.62%. Apparently that cut isn't enough, nor the further cuts already enacted which will bring it down to 1.355 mills by 2010. So is the growth in BPT revenue a mirage, or is it perhaps due to a contribution by the tooth fairy each time a business leaves?
To clarify1. Baltimore’s
To clarify
1. Baltimore’s middle class population loss has flattened, a quote from a report put out last year by Dan’s own Brookings Institute: “Recent estimates show that the city's population loss has abated.” Or, from the city itself: http://www.ci.baltimore.md.us/business/tcb/050330.html. It's difficult to get a good picture of where Philadelphia's population loss stands because there haven't been many reports since the 2000 census. I actually wouldn't be suprised if Philly's middle class population loss has slowed in recent years, due to, dare I say it out loud, the ten-year tax abatement.
Dan wanted to compare Philadelphia to Baltimore, so I did. Baltimore has a higher crime rate and crappier schools, but its middle class is choosing to stay and investment in the city’s infrastructure and business centers is booming. These trends seem to have begun after Baltimore lowered its real estate tax and started a its pro-business policies. Education is a good way to promote sustainable development but there is more than one way to skin a cat folks.
2. Yes, DE II, you are completely distorting my argument. The “half full approach,” as you call it, means that we should consider the fact that people and businesses do care about their tax rate (Dan's own chart calls it "very important”), rather than thinking it’s not important just because it’s not in the top three. My point? People give a damn about their taxes or taxes wouldn't even make their top ten! People take a lot of things into consideration when choosing a city, and I think it’s significant that people listed taxes as “very important.” I don’t see “number of dog parks” or “distance to my babysitter” up there, do you? I guess Dan't point is that people don't base their entire decision of whether to move into a city on that city's taxes. My point is that when schools are bad and crime is bad, and the neighborhoods look like a dump, maybe taxes can be the straw that broke the camel's back. And did you read the word "eliminate" anywhere in my post? Don't think so.
3. We shouldn’t automatically shoot down any idea that focuses on business development, including reducing the business privilege tax. Personally, I would make the reduction contingent on spending somewhere else e.g. getting businesses to provide services the city would otherwise provide. If the city would actually check to see whether companies are keeping their promises, this would be a useful idea. (BTW, anybody check out last week's Loose Canon in the city paper? I've posted it here for your enjoyment:http://www.citypaper.net/articles/2006/12/07/On-Demanded) Stan, I hope that answers your question for where the money would go. Politics is only a zero-sum game if you make it so. Can someone think outside of the box here?
This isn't to piss on anybody elses ideas (like people are pissing all over mine). And I’m not saying don’t invest in schools or education. I’m saying that we have to take a holistic approach to the problem. Workers need jobs and employers need workers. It's foolish to only focus on one end of the equasion. Philadelphia isn't a field of dreams: if we have an educated work force, jobs won't necessarily come, especially since there are surrounding suburbs that are a lot friendlier and an already healthy commuter culture. What I want to know is what we’re supposed to do with all these highly educated people when they graduate and can’t find a job because all of the businesses are in the burbs? I know, they can move to Jersey like everybody else.
Gee, I Guess Businesses Had More Gross Receipts
Gee, I guess that businesses had more gross receipts and/or the City is doing a better job collecting the tax. We may or may not have more businesses, I believe the number of businesses has been flat for some time. I do know that for the last 10 years that Philadelphia employment levels have been nearly flat (January 1996: 579,646, October 2006: 593,467, with a high of 622,136 in December 1997). The BPT is a blatantly unfair tax and noncompetitive tax. Let’s tax businesses before they make a profit, what a great concept; that will put us at a competitive advantage to the suburbs and other cities. The BPT revenue was down in FY 2002 and 2003. Two or three years does not establish a trend or even a pattern. We still have the second highest combined local and state corporate income tax rate after NYC, and the last time I checked there are a lot more business and competitive reasons for a business to be located in NYC than in Philadelphia, not to mention that the cost and level of government services provided to businesses are inevitably greater in NYC than Philadelphia.
Should we have a higher tax on gross receipts; using your apparent logic we should. Businesses are not bad nor or they the enemy. Making a profit or having higher gross receipts is not bad. While some businesses may be greedy or be bad actors, lumping them together as the enemy is a gross disservice. The last time I checked, businesses employ people and provide goods and services to our society. In Philadelphia, they also pay the second highest corporate tax rate in the country. Is your goal for us to be number one?
A matter of faith
Baltimore City's population fell from 643,304 in 2003 to 635,815 in 2005 – a decline of 1.16%. Philadelphia City’s total population fell from 1,477,055 in 2003 to 1,463,281 in 2005 – a decline of 0.93%. However, since the last Census Philadelphia’s population has fallen 3.6% while Baltimore’s has only fallen 2.4%. Most of the difference in decline since 2000 is due to a sudden increase of about 6,000 in Baltimore’s population in 2003. J. Young these are really small differences and the chance that they represent responses to changes in tax policy is very likely zero. Of course some people see the Virgin Mary in their morning toast maybe you are similarly gifted with respect to tax policy.
http://www.census.gov/popest/cities/SUB-EST2005.html
OK, lets stop this now
OK, lets stop this now before it gets silly.
We all want businesses to locate in Philly, and to create good paying, sustainable jobs while doing so.
I simply strongly believe that the best way to go about creating good paying, sustainable jobs in Philadelphia has nothing, or very little, to do with the BPT. And I think our collective energy should be spent elsewhere.
How about fact
A: you are looking at estimates. Baltimore challenged the census over miscalculations recently (I can't find the article right now). Also, I said something along the lines of, I wouldn't be surprised if Philadelphia's population loss has slowed also. Read the whole post before you reply.B: I believe I restricted my comments to middle class.C. I believe I said taxes and economic development. Baltimore (and Philly) have done a lot more to bring in business than just cutting taxes.D. If it's not policies like Philly's ten year tax abatement or Baltimore's building up of its Inner Harbor and office parks, than what is it? Crime is on the rise and schools continue to be bad in both cities, but population loss is slowing. What do you propose as the X factor? The magnificent cheese steaks? The tasty crabs? You shoot down my ideas based on a hunch and without providing a model of your own. All of Philadelphia’s growth has been happening around it’s commercial corridors: No Libs, Manayunk, Art Museum, Chestnut Hill/Mt Airy, Italian Market. That’s not faith, that’s fact. I am beginning to think wma122 is right - Write anything saying economic policy isn't evil on this site and you get flamed.
touchy
What actually caught my attention is the fact that you referenced middle class population loss a measure of income and population at the city level. You have yet to produce actual estimates for this measure for either Philadelphia or Baltimore and yet you assert to know the cause of trends you just happen to believe to be there. Gee? Can’t imagine why people come after you?
This thread started about Nutter
That's why people assumed you were talking about eliminating the BPT. Nutter has been fanatical about elimination as an objective. After the Mayor vetoed one bill to eliminate the tax, Nutter introduced another one four months before the next year's budget bill was even introduced. And then he pushed hard to get it passed before the budget bill was introduced. So his approach has been wipe out the BPT first, then worry about what the City needs to spend. Right out of Philadelphia Forward's playbook.
When he saw the writing on the wall, Nutter did later go along with more modest cuts. But it's clear what he wants to do, and it's crazy.
As to making tax cuts contingent on "getting business to provide services . . .", Nutter ridiculed suggestions by people like Lance Haver to condition the tax cuts on anything. So you've got an interesting idea there, one I included in my lengthy post on a progressive tax alternative, but Nutter's not on that team.
to stretch your metaphor
"My point is that when schools are bad and crime is bad, and the neighborhoods look like a dump, maybe taxes can be the straw that broke the camel's back."
I suppose that's possible, but it seems to me that it would be more accurate to say that taxes are a feather that lies on top of a camel that collapsed long ago, under the weight the heavy bricks of increased crime and lousy schools - bricks fashioned out of racism and negative economic trends on a larger scale (the industrial economy of this city no longer being viable).
No intent, really, to piss on your ideas. And I do (and thought I did) acknowledge that in your arguments, you aren't saying that reducing (or eliminating) the BPT is the only idea comprising the goal of stimulating business growth.
And I agree that shooting down any ideas that focus on business development is not productive.
Ok, but all of that said, I think that certainly focusing on the BPT (which apparently your aren't), but even to a large extent prioritizing purely economic issues such as business development over the the related socio-economic issues such as crime and schools will never be particularly effective at addressing the needs of the bulk of this city's citizens.
Obviously, teasing out when focusing on business development is more about addressing the needs of the already monied than about addressing the needs of the majority of Philly's citizens is a very complex, and probably never achievable goal. But I would argue that the place to start is the kind of tax reform Stan advocates in his post (nice post, Stan), rather than on the BPT.
Confluence and Study
We should not overstate either case. DEII is correct, we should not act as though City Line Ave. exists inside of a vacuum and that we can actually predict, with certainty the reason why business located on either side. At the same time, however, we have to realize business development in this city is based on a confluence of issues related to marketing and marketability and does include taxes. The north (or west, I really do not know) side of City Line Ave. lies within a community that business leaders, generally, feel more comfortable being in. Taxes are one reason--but certainly not the only reason.
Though, City Line Ave. does defy convention in that the same workforce is available on one side of the street versus another, we cannot overlook the fact that in the 1960s, 70s and 80s it was the place to go to escape Center City and all of the ills therein. Part of that motivation was crime and taxes. But, now it is a commerce center that is attractive in its own right--whether through lower taxes, easier bureaucracy or whatever. Now, it is a competitor, plain and simple.
The question, or the focus, needs to be--how do we make the Commercial Centers of Philadelphia competitive with Cherry Hill, City Line and King of Prussia. Simply saying lowering taxes is a cure-all misses that mark entirely and is short sighted.
I believe things that will help Philadelphia attract new business are:
Reform in government and transparency;
Government efficiency;
Streamlining the permitting/licensing process for new businesses;
Lowering the start-up costs of business (fees, etc.);
Invest in educating our future workforce;
A wholesale evaluation of the Philadelphia taxing apparatus; and
Keeping educated talent in Philadelphia.
Related to the evaluation of the taxing apparatus--I have said this 100 time at least. We need to determine at what rate we are collecting taxes (property, wage and business). For example, if we are only collecting property taxes on 50% of the actual properties in the city, the remaining 50% is missed opportunity--someone owes the city money and we must step up in collection and enforcement. Once we determine what is coming in and set goal to increase that number, then we have a realistic account of what our monetary situation looks like.
Then, we must audit what we are spending money on. Are services being provided at peak efficiency? Inefficiency and redundancy wastes money.
I will guarantee that we will find lost money in this process. Then we can talk about lowering taxes.
But, I want to point out--commentators have said that our surplus this year is a sham as it represents maintenance costs the administration has deferred. If that is true, we need to realize our priorities as a government necessarily include roads and other physical infrastructure. Imagine trying to make this business argument when your roads are in shambles and deliveries can't be predictably made. Infrastructure is vital--and some of the counties are doing a fine job of erecting (with help of course) and maintaining their transportation infrastructure compared to us. Of course, our infrastructure is old--but all the more reason to question the wisdom of deferred maintenance.
Not the only part
"Part of that motivation was crime and taxes. "
The main reason was racism.
While I agree with your larger point (I think) that "we have to realize business development in this city is based on a confluence of issues related to marketing and marketability and does include taxes," there is still an issue of priorities.
Yes, tax structures might be relevant - as would all of the issues you listed, but it can be dangerous to focus on business taxes and other issues of "marketability." Of course, it is legitimate to say that improving the business climate is one way to address the needs of our poorer communities, but as you say, it is certainly no "panacea," and the approach of improving the business community by elimnating the BPT has huge associated risks for the larger community.
racism and busniness
People of color business owners do not go under because of the BPT. They go under because banks don't give as much money to black people as they do to white people.
Improving access to capital for new business at the outset makes a lot more sense than tinkering around the edges of tax policy to fix problems.
I mentioned tax apparatus as
I mentioned tax apparatus as it seemed to be the most relevant to the conversation at hand. But, yes, it is just a part of a larger goal--making opportunity happen and giving it a place to grow.
Related to taxes--I advocate a reasoned approach. Why would you cut taxes if you knew you did not have the money to sustain services? Or, why would you increase them if you know you don't need to? These are simple questions--and for me, a reasoned tax policy is vital when we talk about taxes (and I am not mentioning the other issues because I want to drive this point home). By reasoned, I mean understanding needs and means. It is irresponsible to cut taxes on an economic therom that has not been entirely proven. In my opinion, you cut taxes because you can--not because you are speculating.
A reasoned tax cut, taking into account the issues I discussed above is okay with me as it would ensure that we can actually afford to do so.
If you want to save businesses money--take the time consuming nature of city bureocracy out of the equation or lower application fees for start-ups. These have a direct cost on initial capital than taxes that are a representation of what is being made.
fine points
Missing from your list Caietanus is infrastructure, transportation and location.
One of the hugest driving forces--and it should be intuitive to all--in business location is how close you are and how easy it is to get your product where it's going.
It's easier to park in Cherry Hill and easier to get on the highway to go to NYC or the South (not as much traffic to hit).
Service-oriented jobs have fewer of these issues as their product is less tangible (you don't really "deliver" insurance or accounting and call centers can be anywhere).
That's why, in addition to some of the suggestions above, the city needs to create classes of jobs it wants to attract. The top tier of desireable jobs should, logically, be those that don't need lots of room to park trucks or be right near a highway ramp and instead those that make better use of the city's physical infrastructure.
Infrastructure is discussed
Infrastructure is discussed at the end of the post in the context of the faux surplus--but you are right, it does desrve much attention. During the time I worked for the two regional planning commissions that I did, transportation networks and infrastructure are vitally important to development--whether you are in 18th Century America, 1950s Europe of 21st century Philadelphia.