The picture below is not exactly a Albert Yee but aesthetics aside, a picture with a story.
The question I put to all of you is what is that story? What does it imply about the health of the Philadelphia economy? Is anything missing? What doesn’t it imply? I realize that in campaign season this is like throwing red meat to hungry tigers but maybe we will learn something.
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Trick questions?
Well, although stating the obvious won't mean much once the YPP wonks get going, I'll self-sacrifice to get the conversation going:
It sure looks like as the unemployment rate in the Country goes, so goes the unemployment rate in the State and Philly. In fact, it's pretty shocking how closely they've tracked over the years.
To whatever extent an either/or evaluation makes sense, I would make a wild guess that it is more likely the case that the unemployment rate in Philly and the State are a function of the national economy than that the economy of the City drives unemployment in the State and the Country.
So, I guess one would have to question the validity of all these theories that draw a cause and effect relationship between tax rates in Philly and jobs in Philly. Which would lead one to question the wisdom of Mayoral economic policies that are based on the projected benefits of tax cuts.
Hmmm. I'm sure that there won't be any disagreement about that last statement, will there?
PS: It's interesting that the UR in PA exceeded the UR in Philly only in the 80's, and that throughout the 80's the rates are quite a bit more similar than during any other period. Can anyone offer some explanation?
Ah, but keep something in
Ah, but keep something in context.
We are losing population and the majority of the ones leaving are not unemployed.
So, it could be argued that, if we had residents staying in the City, we could have an unemployment rate that is dropping more than the averages.
Again, we are trying to relate policy based on a single statistic. It would be more relevant if it was normalized against other factors.
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Staff member of Longacre for 5th Council District.
Longacre Website
That's not clear either
Some of them may have been unemployed here and left to get jobs somewhere else. So the effects of outmigration are completely unknown. As I think you're conceding are the effects of tax cuts. But then you've never been a true believer, raideradam, as I recall. I'm more interested in hearing from them.
No matter what my position
No matter what my position is on a topic, first and foremost integrity of data and methods of analysis are the most important to me.
All my point was for that post was that the graph isn't enough to prove or disprove any stance.
And no, I am not a true believer of the tax cut philosophy. As I have stated and as I believe you recall, my stance is "business climate" is what helps grow business and there are many factors for tat, which taxes are only a part.
Most of my theory is KISS method. It all boils down to "are businesses/people getting what they pay for?" I think the consensus from everyone is that it is a resounding "NO".
So, the possible solutions are:
1) Lower cost of doing business (which sub-categorizes to taxes, labor force, etc.)
2) Increase services (better transit, better workforce, zoning process, etc.)
3) Do both.
But I digress and do not want to hijack the thread. Again, my original post was just in regards to the fact that one stat does not make an argument or defense.
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Staff member of Longacre for 5th Council District.
Longacre Website
It's too bad
that in real life 1) and 2) may be inconsistent with each other because to do 1) at least by cutting taxes, you probably won't have the revenue to do 2) and in fact, you may well have less revenue to even maintain services where they are. Your other alternative of lowering the cost of labor has other interesting ramifications to it, of course, that we need not get into here.
Its a Hobson's Choice, b/c
Its a Hobson's Choice, b/c if you cut City Services (either by forced layoffs of people, hurting morale by cutting benefits, or just reducing the scope of services by shutting pools, etc.), taxpayers who expect those services (and pay the highest taxes) will move out of the City to places where the legacy cost of providing those services is lower (or their tax base is lower and they can privately pay to have those services themselves). The tax break will mean very little in light of all of the other costs of living in the City.
If you don't cut taxes, and maintain the existing level of City Services, people will move, b/c you can quickly increase your salary by moving away from the wage tax and the other business taxes.
While there has been some improvement in some neighborhoods, a lot is empty nesters and DINKs or single young professionals. Families (in all income brackets) are moving out. That's good and bad. Good b/c families require more services -- schools, pools, rec centers, etc. Bad, because families are the backbones of communities and provide stable tax revenue. Empty nesters and DINKs have a bad habit of moving to Florida or the suburbs, respectively.
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I do not work for/support any candidate for any office in Philadelphia.
And that is why government
And that is why government is about tough choices. If solutions were easy and obvious, we wouldn't be in the current situation. ;)
We all know something needs to be done, we just don't know what. Unfortunately no matter what is done, it takes time for the dividends to show, so you don't know if any of the sacrifices are worthwhile or make things worse in the long term.
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Staff member of Longacre for 5th Council District.
Longacre Website
Well here come two statements in a row that agree
mostly. My only disagreement with DE is with the notion that Philly and PA unemployment trace each other closely over the years. They do in overall trends, but within those trends there have been substantial variations. This is also particularly noticeable within the city/federal line trends. For instance, the Philly line began to jump to a much higher level than the federal line in '91 or '92, just as Rendell took office at the tail end of our bankruptcy scare. The tax cutting started a few years later, and has done nothing to bring the lines back together. Of course, you could say that the gap between the Philly line and the others really jumped in '75 or '76 when Rizzo imposed a huge tax increase to get out of an earlier budget crisis. However tax rates stayed that high all during the 80's and even edged up a bit on the real estate side. The early 80's is also when the net profits tax first appeared, replacing the old business tax which was all on gross receipts. I don't remember if there was an immediate overall increase in biz tax receipts at that time or not. In any event, that's when the unemployment differences sharply *decreased* notwithstanding the high tax rates. The gap didn't grow again until the late 80's and has stayed constant through today with all of the tax cutting that's taken place.
Bottom line, DE is right, unemployment has gone its own way, without any pattern that is linkable to local tax rates.
Clarification Requests & Questions
Was the definition of "Unemployment Rate" constant throughout the period? I vaguely recall that under Reagan, the definition was changed to exclude a lot of people previously considered unemployed. Was the gap between Philly and Pa./USA smaller in the 80s/early 90s because fewer people were unemployed in Philly or because fewer people in Philly were defined as unemployed? If it wasn't merely toying with a definition, why did the gap to shrink during that period?
What caused the large gaps between Pa & USA in the late 70s and around 83-84? Was that due to trouble in the steel or coal industries?
As for the link between the national/state economies and Philly, it is one reason I oppose tying tax reductions with triggers. Poorly designed triggers (which would probably be designed by opponents/to placate opponents of the tax cuts) would poorly assess the true effect of the tax cuts and instead measure the National economy.
I think a more informative chart would compare Philly with the region. Philadelphia is more affected by what happens in Montgomery County (and S. NJ & Del.) than what happens in Pittsburgh or Erie. From the articles I've read, the region has experienced job growth over the last 40 years and been economically healthy, while the city has been in decline. Gross numbers of jobs or wages by county may be more interesting than rates (although also an incomplete story).
The rates seem close in 1970. Were they always close in the late 60s? If the chart were to go back to the 20s (or whatever), would Philly be better than the state & country until the 50s or 60s?
As for aesthetics, that Yee picture is cool and the light-gray dotted-line is very hard to see. I recommend using a solid color for the USA.
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I support Michael Nutter for Mayor.
And what were the concurrent levels of sunspot activity?
Why would a change in definition affect the City and State URs differently?
Please explain something to me. I thought the argument being put forward is that cutting taxes will bring in jobs. More jobs, lower unemployment (assuming that the population doesn't grow at the same rate as the number of jobs). But the chart suggests that unemployment rates in Philly are not a function of tax cuts in Philly (or statewide, or nationally, for that matter). So, why are you worrying about triggers anyway? Are there reasons to cut taxes other than it possibility it would create jobs (oh, other than the fact that it would increase corporate profit margains, that is)?
Good observations, D.E.
Also, slight errata to my earlier comments. I was actually comparing the City to the State line; I mistook the latter for the federal line. So the lack of a pattern that I pointed out relating UR's and local tax rates should have referred to the City-state relationship. But there's clearly no pattern involving local tax rates and City-federal trends either. The federal and PA rates have tracked so closely together the whole time, especially over the last 15 years, that my City-PA observations clearly apply to the City-fed rate relationship as well.
Why would a change in
If my understanding is correct (a big if), the definition was changed to exclude the long-term hardcore unemployed for whom getting a job was very unlikely. I speculate that such people would have been more prevalent in Philadelphia than the rest of the state and country.
No. The chart shows that unemployment rates in Philly are not a function of only tax rates. That's obvious and uncontroversial. It is obvious that many other factors, such as education of available workforce, city services, national economy, etc., have an effect as well, with national economy probably larger than any other factor.
It does not show that tax rates have no effect on employment. There are a plethora of studies that conclude that they do. As to what the effect is, I think comparisons between Philly and the region would be more instructive than between Philly and state or country.
Because people point to one chart as proof that tax rates have no effect on anything.
I don't think triggers would effectively isolate the effect of tax cuts. If there is a national recession that causes unemployment in Philly to rise, I don't think that tax rates should be blamed.
That's the primary reason for me.
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I support Michael Nutter for Mayor.
Here's the thing Aardhart
If tax cuts aren't that significant a factor in unemployment rates, as the charts really do show, then how can we justify gambling the fiscal health of the City on them? Even if more businesses are attracted, which is what people intuitively believe, that doesn't really matter unless they bring jobs with them. So to state my question another way isn't it a pretty reckless gamble to cut these taxes unless we know for sure that cutting them will play a pretty big role in reducing unemployment? And doesn't the chart show that we can know no such thing? It doesn't make sense to cut $200-400 mil in City revenue for something that has just some unknown impact on unemployment does it?
Is it the cheesesteaks?
Why? Is it the cheesesteaks?
Proof? No. But Aardhart, look at how those different variable track. They aren't just similar; they are virtually identical. And not just for a limited period of time; we're talking about some 40 years. I'm no statistician (I even have trouble pronouncing and spelling the word statistician), but I would guess that the probabilities of rates tracking together like those do without their being some kind of a functional relationship are very, every small.
And one of the anti-tax cutters' arguments all along is that national economic trends explain the recent gains in Philly. But the tax-cutters have claimed that no, that can't be true (without, at least from what I've seen, any proof), and that the gains in Philly are the benefits of recent tax cuts. So it seems to me that the burden of proof is on the tax cutters; they need to explain how this chart doesn't show that as the Country goes so does Philly.
These stats don't prove anything - but if you're going to base your entire Mayoral economic policy around the supposed benefits of tax cuts, then you should have a pretty damn good way to argue against what these charts suggest. And wow! Amazingly enough, the surrounding counties also track the same way?
Interesting. Because you do feel that we should cut taxes even if possibly a national economic upswing is what's responsible for high employment (as the charts suggest). Nice. Employment up? Cut taxes. Unemployment up? Cut taxes. Philly's economy doing better because the national economy is doing better? Cut taxes.
Urban decay
Why? Is it the cheesesteaks?
No. It's urban decay and the concentration of poverty.
Someone at the debate said that 45% of the adult population of Philly is not in the workforce. Yet, the chart tells us 6% are unemployed. Susan pointed out below that the UR does not include some people. It does appear that those without jobs in Philly are not fully included in the UR. It's not because of cheesesteaks.
If the numbers are not meaningful, they can't support anything. I'm asking how meaningful they are.
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I support Michael Nutter for Mayor.
Plus...
It's difficult to track the underground economy of the poor. Bottom line is, we have a sizable chunk of city residents who are not financially stable, regardless of employment.
Press secretary, Knox campaign. Blogger on hiatus, former award-winning journalist.
Right on Susie! Vote Fattah!
That's why Chaka Fattah has taken a huge risk in his campaign and said that we need to commit ourselves as a city to reducing poverty by one half by 2020. No one has ever run for Mayor in the city of Philadelphia with this promise.
Fattah has a plan to end no-bid contracts and make government more open and accountable, but he knows that that alone will not make a real dent in poverty--poverty caused by the end of our nation's mid-century industrial economy and a systematic denial of opportunity thereafter.
Glad to hear you are on board! In fact, you are making the points about my candidate so well, I almost forgot you worked for that other guy...
Um, Ray?
Have you had time to read any of Tom's plans? Because ending poverty is the thread that runs through them. In fact, it's the reason I work for him.
Press secretary, Knox campaign. Blogger on hiatus, former award-winning journalist.
oh is that who you work for?
I forgot! I must have gotten you confused. Sorry--wrong Susie.
The Underground Economy
this was adecent book.
Off the Books: The Underground Economy of the Urban Poor
by Sudhir Alladi Venkatesh
From Publishers Weekly
In this revealing study of a Southside Chicago neighborhood, sociologist Venkatesh opens a window on how the poor live. Focusing on domestics, entrepreneurs, hustlers, preachers and gangs linked in an underground economy that "manages to touch all households," the book reveals how residents struggle between "their desires to live a just life and their needs to make ends meet as best they can." In this milieu, African-American mechanics, painters, hairdressers, musicians and informal security guards are linked to prostitutes, drug dealers, gun dealers and car thieves in illegal enterprises that even police and politicians are involved in, though not all are criminals in the usual sense. Storefront clergy, often dependent "on the underground for their own livelihood," serve as mediators and brokers between individuals and gang members, who have "insinuated themselves—and their drug money—into the deepest reaches of the community." Although the book's academic tenor is occasionally wearying, Venkatesh keeps his work vital and poignant by using the words of his subjects, who are as dependent on this intricate web as they are fearful of its dangers.
To repeat
To repeat here is a report paper that gets at this issue. You are correct Philadelphia’s labor market is sicker than unemployment rates reveal. Perhaps Monday evening I can offer up some additional numbers on underemployment rates in Philadelphia and the region.
underemployed vs. unemployed
Ok, sure, no doubt there are a lot of underemployed in Philly. (45% of the adult population not in the workforce? Anyone have any reference for that number. If it's true, wow!). But I don't know that is unique to Philly: coal country, steel country, farm country - all areas where I would imagine there are a lot of underemployed folks that wouldn't show up in unemployment stats depending on how unemployment is defined.
Maybe you're right - hopefully Price will give some more informative numbers - but I would doubt that the differential between unemployment and underemployment is signficantly larger in Philly than in other areas of PA or the Country.
Meanwhile, I heard Nutter in the debate today telling us once again about how tax cuts are the single most important element of his campaign. And the basis of such analysis? The fact that as taxes were cut in Philly the economy improved (for some folks, at least, alhtough it still hasn't been made apparent that the improvements cut across class lines).
As I've been trying to get across
it's Nutter who is the fanatic on this issue, not me. In fact, there was no such issue until he dreamed up the mission and unbalanced composition of the Tax Reform Commission. And he's inspired two other candidates, Knox and Brady to take a similar line, though not quite with Nutter's level of zealotry.
Nutter's Actual Position
Phase out the gross receipts portion of the BPT, bring the net profits portion down to the same level as the wage tax.
So he now says
But he has a record that he can't wipe out, a zealous and relentless effort over three years to wipe the tax out -- all of it. He was a man on a mission; there is no reason to believe that ultimate mission has changed.
Incomplete Answer
Aardhart this doesn’t begin to answer your many questions but it is just so nice outside that this will have to do for now.
Well, here is an interesting
Well, here is an interesting argument to ponder for discussion sake.
Let us make the leap of faith and say that our unemployment rate will always mirror trends nationally. Then yes, we could say that lowering taxes will not affect unemployment rate.
But would it also be true that no matter what do we wouldn't change the unemployment rate?
I think a more relevant graph would be comparisons of per capita incomes. I would go out on a limb and assume those don't mimic.
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Staff member of Longacre for 5th Council District.
Longacre Website
But would it also be true
If policies specific to Philly won't affect the Philly UR on the same scale as national economic factors, that doesn't mean that we shouldn't be focusing on getting better jobs that pay better (because that would generate higher tax revenue), or businesses that are more profitable (because they would generate higher tax revenue).
So, once again it would seem that offering better services should be the point of focus. Let me ask you, if you had two choose between attracting one of two businesses to Philly, which of the following would you choose:
(1) A call center that generates a lot of profits on a a small profit margin and makes its money on volume, based on hiring minimum wage workers, and that wants to come to Philly because a lower tax rate will have a huge impact on their profit margin in relative terms
2) A biotech company that is attracted to the region because the Philly government has worked closely with UPenn and created a streamlined process for coordinating City services for companies needing biotech research, and that has a high profit margin, and wants to move here because of those services and the availability of highly qualified (and highly paid) researchers, and not because of low taxes -- because a few percentage points' difference in specific business tax rates will have a relatively small effect on it's profit margin.
Ok, so it's a completely contrived and a highly rigged example. But the point remains that there can be many reasons to work to attract companies by increases services and effeciency of services, even if it won't have as dramatic an effect on employment rates as aspects of the national economy.
Of course if it is done
Of course if it is done right, you shouldn't have to make the choice. They would both want to come.
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Staff member of Longacre for 5th Council District.
Longacre Website
For Raideradam
Raideradam, you asked for the figures on Per Capita Income.
Now one of the problems with Per Capita figures is that they obscure rising inequality (really follow the link). Per Capita measures by design assume an equal distribution of income; redistributing high incomes like those earned by Toll Brothers CEO Robert Toll (23.4 million in 2006) and Comcast CEO Brian Roberts (27.8 million in 2006) across the population. So first here is the percentage change in Per Capita income from 1995 to 2000 and from 2000 to 2004.
But to illustrate that not all boats are rising in this economy below is the percentage change in Median Household Income over the same period.
So what these income charts reflect
is the wave of rich empty nesters flocking to center city. These folks drove up average income, but were so few in number that they had little impact in stemming the trend of the overall City population getting poorer. Is that pretty much correct?
That is certainly one explanation
That is certainly one possible explanation but I don't know for sure.
Nice job on the research,
Nice job on the research, Price.
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Staff member of Longacre for 5th Council District.
Longacre Website
Thanks
Thanks. It looks good.
I have a few more questions and a few suggestions.
The data seems more erratic in the 70s and much smoother since 90. Did something change in method?
Looking at the new chart, it is hard to see trends. It looks like there was an increase in the gap in the late 70s, but mostly the gap seems pretty consistent. I think a good chart would be of the differences of PhillyUR minus UR of combined 4 other counties, Pa, and USA.
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I support Michael Nutter for Mayor.
Another for Aardhart
How did I become John Hodgman from those Apple Commercials.
Aardhart, not quite what you asked for but these should help you see some of what you were groping for. First is the aggregate unemployment rate for the suburbs followed by a ratio of the Philadelphia unemployment rate to the suburban unemployment rate. For the second graph a value of 2 means the Philadelphia unemployment rate is twice the suburban unemployment rate.
Price, these are all great.
Price, these are all great.
The back and forth I think has been good.
Thanks, I think the back and forth has also been good.
Fascinating
Rizzo raises the wage tax a full percentage point from 3.3 to 4.3 in 1976. Meanwhile in the 8 year period from just before the increase to well after it in 1982, the disparity between suburban and Philly rates DROPS SHARPLY from about 1.9 to 1.3 (with a few zigzags in between). So taxes go up, the unemployment gap with the suburb declines. Then the disparity rate reverses itself going back up sharply to 2.0 over the next 6 years just before and after another smaller wage tax increase in 1983 and an increase in the BPT net income tax rate from 3.7 to 4.35 in 1986. Here taxes go up and the gap with the suburbs also increases. Then the net income portion of the BPT rate jumps 50% from 4.35 to 6.5 in 1989 and the disparity between rates DROPS through 1993 to 1.4. So here again, taxes go sharply up, disparity with the burbs drop. Then the disparity meanders around a little, then taxes begin to decline slightly and steadily from 1996 onward. Since then the ratio has been virtually flat with a slight upward tilt. Conclusion: There's absolutely way that this disparity trend can be linked to Philly tax rates.
Am I Justin Long?
Thanks for the new charts.
Why did you use a ratio (/) instead of gap (-)? It seems to me that the gap is pretty consistent, not the ratio. The ratio seems to reflect overall UR more than the difference, and I think the difference is more relevant. The gap chart seems like it would be just as easy as the ratio chart. Do you feel the ratio chart is more relevant, or merely less favorable to tax cuts?
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I support Michael Nutter for Mayor.
A question for you: how would you properly assess the impact
of tax cuts? Or do you think it's so obvious that they pay for themselves with extra left over for better services that there's no reason to measure?
Empirically
I do not think that all tax cuts pay for themselves and favor decisions based on sound empirical data.
The way to assess the impact of tax cuts is to isolate the effect of that variable. Ideally, controlled experiments would be used, but that is impossible. Therefore, the effects of variables are isolated as best they can econometrically. Academic studies have concluded that high taxes in Philadelphia have had, and do have, a negative impact on jobs, based on empirical data.
I'm not an economist, but believe this is true. Most of what I read concurs with this. Marc Stier also agrees with this. I'm not sure if Dr. Price disagrees with the bolded statement.
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I support Michael Nutter for Mayor.
show me the data!
you don't have to be an economist to link to a study...
If I'm not mistaken, Price
has indicated in the past that he wasn't convinced that the studies that prove loss of jobs in Philly due to taxes were adequately controlled for the very issue these charts present - national trends. I assume that's why he started this thread.
I haven't read any reviews of these famous studies, so I don't know how well they were done - but as far as I know, while they theoretically quantified job loses due specfically to higher taxes, they didn't compare those numbers to jobs lost due to a poorly educated work force, due to poor City services, due to national economic/industrial trends, due to the allure of the Sun Belt, due to racism, etc., etc., etc. How could they have? Did they quantify jobs lost for those other reasons? Have you seen any such comparative analysis? If not, then how can you defend prioritizing tax cuts over focusing on addressing those other factors?
How can I? How can you?
I think Price has said that he thought those studies had flaws, but I don't recall him ever saying whether he disagreed with the statement "high taxes in Philadelphia have had, and do have, a negative impact on jobs."
how can you defend prioritizing tax cuts over focusing on addressing those other factors?
I don't think it is "prioritizing over." I don't think it is either/or. I think the tax problem should be addressed, along with the education problem, the inefficiency/corruption problem, the crime problem, etc. Every candidate has proposed approaches to all the problems. (Even Fattah is sounding like a supply sider.) Unlike Stan, I don't think that a gradual decrease in taxes over a seven year period would bring about the apocalypse. Taxes have been lowering for the past eleven years, and tax revenue has increased every year except two. Yes, national economic trends helped us out, but the apocalypse/gaping hole in revenue that he has been predicting did not appear.
Maintaining tax rates do not necessarily lead to a steady tax revenue. From the fifties to the nineties, tax revenues have constantly been increased, because maintaining the same rates did not lead to a steady tax revenue. People and businesses have been leaving Philly since the fifties, and taxes are frequently blamed.
If excessively high taxes are a problem, how can you defend ignoring them? How can you defend maintaining them without proof that they are not causing a loss in businesses and population?
That's why we are exploring whether, or to what extent, high taxes are a problem.
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I support Michael Nutter for Mayor.
on priorities
Then I think you should look at the video of the forum at the Chamber of Commerce (I think that's where it was): When asked what was their main priority in dealing with Philly's economic problems, of the three that were there, both Fattah and Knox said that cutting taxes was not their priority. Fattah talked about poverty abatement, and Knox talked about cutting waste. Nutter, on the other hand, point blank said that he disagreed, that cutting taxes was the most important thing, and that cutting taxes was his priority.
You said above:
Hmmm. The charts strongly indicate that local tax rates have not historically been a driving force in Philly's unemployment rate. The astoundingly parallel flucations in the Country, State, and City URs suggest that the employment rate in Philly has historcially been most significantly affected by the conditions of the national economy. Again, regardless of the issue of revenues, the whole rationale for the lower taxes and they will come philosophy is that adjusting local tax rates will be a driving factor in the local unemployment rate. The studies you reference say that as well, by implication, when they blame job losses in this City on high tax rates. Above, you said that increasing employment is the main reason to lower taxes.
I'm not defending taxes as they are currently structured, or how they have historically been structured. You've been through this with Stan before, but the point as I see it is that prioritizing and locking in tax cuts, without concrete proposals for creating tax neurtality, and without prioritizing focusing on the nexus between poverty and unemployment/underemployment is a very big risk to take.
And btw, there are a lot of reasons why I'd like to vote for Nutter. But my concern about him remains, as it always has been, that he is an ideologue on the tax issue, or that his main focus in on bettering the overall economic environment by focusing primarily on the economic environment for those who already have a lot of money and theorizing that those benefits will trickle down. That makes me very uncomfortable about his candidacy.
She's got a nice personality
I don't see why you consider talking about taxes to be inappropriate when asked about the economy. It's not like he was asked about taxes and he answered about schools. I doubt if he ever said that a tax cut was more important than schools, crime, or corruption. But when talking about the economy, he thinks they are important, as many people do.
Why talk about taxes? It's the economy ....
I don't think the chart has enough information to reach the conclusion that you have, but I think the debate will continue another time.
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I support Michael Nutter for Mayor.
Huh?
Of course talking about taxes is relevant to the economy. But you said it wasn't an issue of priorities. Nutter, apparently disagrees - as he said that cutting taxes is his number one priority in dealing with Philly's economy,
number one priority
A number one priority in dealing with Philly's economy is much different than a number one priority in dealing with Philly. That's all I'm saying.
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I support Michael Nutter for Mayor.
As D.E. II has said
we have been through this before. But let me add some facts. Any increase in City revenue over the past several years has been due to the national explosion of corporate profits, not tax cuts. How do we know? Well, the number of businesses in the City has actually declined. Growth in taxes has been due to an increase in the average tax paid per business, not new businesses attracted into the City. Let me give you some numbers from the City Revenue Department on the actual number of businesses paying taxes in the City over the 7 tax years running through 2005:
1999 86,527
2000 86,664
2001 73,048
2002 83,144
2003 82,349
2004 80,812
2005 75,332
These numbers show tax filers which is not exactly the same as the number of businesses, but a close tracker of that number. So although tax revenue has increased since 1999, with some zigs and zags, it's the national economy, not local factors that have driven that result. There's been no growth due to any new business drawn to town due to a better business climate created by BPT or wage tax cuts. There have been no new businesses coming. And the trends since the 70's, as shown by Price's charts, also negate any connection between tax rates and the number of businesses because the number of businesses is presumably connected to unemployment rates. So Price's charts suggest, though don't prove, that business growth has been comparable everywhere in the region, despite fluctuations in Philly tax rates.
So, bottom line, cutting taxes even modestly is risky, a risk that has been countered over the past few years by sharply increasing corporate profits. Luckily during that time the Net Income part of the BPT has not been cut. Cutting taxes sharply, particularly the Net Income part which now accounts for 3/4 of BPT revenue, even over 7 years, could well be catastrophic at a time when we need to actually spend a lot more just to stay afloat.
Lastly, it's disingenuous to suggest that cutting tax rates is just one item on a to-do list that could be tried together to deal with poverty. One set of priorities would lessen parts of the pie available for others. True. But cutting taxes, if the risk doesn't pay off, reduces the size of the pie. So there's less left for everything else. It's a major risk, it defies ordinary math, and people need to face that reality.
You're mainly talking about the Econsult study
whose result was utterly predictable and paid for by the business dominated Tax Reform Commission that hired them. There was no way they could come up with any other result. But even coming up with it, they had two major qualifiers: a) you get no bounce if you also have to cut services, and b) you have to cut services unless the revenue lost from the BPT cuts gets made up for through high increases in real estate taxes which, very probably, would be blocked by Council and the Mayor. So panacea, BPT cuts are not, especially, as you so want to do, you look at the variables pointed out by Econsult. Your candidate, should he and we have the great misfortune to have him elected, would very soon be eating some portion of his highly contradictory promises to increase services, cut business taxes and also sharply restrain increases in real estate taxes.
For Aardhart
Aardhart wrote:
I believe this is what you are referring to:
To sum up the decision you are referring to was to continue the practice of not including discouraged workers in the official unemployment rate.
Ahhh the good ole' days
Thanks Price. That is a very interesting and thought provoking illustration. Your post reminds me of the days of old here on YPP, when we discussed and debated policy and issues; not just 24/7 spin doctoring.
Is anyone aware of any examples of policies enacted locally (anywhere)that drove unemployment rates significantly lower than the national trend?
"Never doubt that a small group of thoughtful committed citizens can change the world. Indeed, it is the only thing that ever has."
— Margaret Mead
Seth
I am new to the site, but do
I am new to the site, but do enjoy the thoughtful analysis. My concern with the spin doctoring is that it hijacks threads so far from the original post that it is hard to keep up.
I posted this concept on another part of the site, but I don't think that lowering taxes alone will by itself affect unemployment. Philadelphia is expensive for a lot of reasons, the least of which are taxes.
1. High Crime. (Yes that is a cost that businesses bear and a reason to relocate/locate elsewhere.)
2. A lower and poorer educated work for. (Lots of great universities, but most Philadelphians don't have a degree from any of them.)
3. Perception that City corruption/union difficulties will make business difficult.
4. Lack of affordable housing in safe neighborhoods.
5. Erratic Airport Services.
6. Lack of major banks.
7. A lot of regulation.
These factors, as well as taxes, scare businesses away and keep the unemployment rate higher than the other averages.
The papers and other tax cut proponents have failed to point out that cutting taxes means cutting services and most of Philadelphia needs more services. Trash is on lots of streets, b/c of only once a week trash service. Potholes don't get fixed, etc. A lot of this is perception, but it affects reality.
The tax cuts have saved on a per worker basis very little but have forced cutbacks in services.
I am not suggesting that tax cuts should not have been made. They have to. Philadelphia cannot continue to punish citizens/businesses with the very high tax rates in light of how expensive it is to live/work in the City already.
But it is not a magic bullet. Just a step in the right direction.
However, what tax cutting proponents should say, I think, is that cutting your taxes will not result in higher employment, and will result in cuts in City services, but are necessary just to not be so completely uncompetitive in the marketplace so as to choke off all growth. (Residential boom can be closely tied to tax abatements.)
Just some food for thought.
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I do not work for/support any candidate for any office in Philadelphia.
Welcome, truthtold to YPP
I am glad you decided to share with us, and I look forward to your future posts.
"Never doubt that a small group of thoughtful committed citizens can change the world. Indeed, it is the only thing that ever has."
— Margaret Mead
* non-disclaimer - I support several very qualified and deserving council candidates, judicial candidates, and a mayoral candidate; but due to the Philadelphia Home Rule Charter, I am prohibited from engaging in partisan politics...otherwise I would be spinning the shit like everyone else !!!
Seth
Thoughtful as all your post, truthtold
and I would add to your list of high business expenses utility and insurance costs. It sounds like you also recognize the tough dilemma we're in having both to cut taxes and maintain services at the same time. Ultimately to do both we're going to have to change the tax mix to make it more progressive and therefore, perhaps, possible to increase the total tax take while making particular taxes less onerous, or find ways to increase aid to cities and counties.
Increased Services and lower taxes
Stan, we both know that there are definite ways to make the municipal government more efficient. By reducing waste we could reduce the cost of City services and in some cases improve them at the same time, and in doing so could reduce the tax burden. An example is the City's Health Care Centers and specificaly the pharmacies. If they were managed better (publicly or privately) we would see a dramatic increase of services and significant savings.
"Never doubt that a small group of thoughtful committed citizens can change the world. Indeed, it is the only thing that ever has."
— Margaret Mead
* non-disclaimer ..disclaimer... I support several highly qualified council candidates, appropriately experienced judicial candidates, and a mayoral candidate prepared to lead our city...but due to the Philadelphia Home Rule Charter I am prohibited from engaging in partisan politics..or I would tell you which buttons to push on May 15th !!!
Seth
Perhaps
but then there are also tremendous pressures for upward spending such as the need to bail out the pension fund, continue providing health services to city employees, provide reasonable wage increases for employees, bail out PGW, improve the schools without much state aid, hire x number of cops, fully fund various candidate promises, etc. The question is do we plug tax increases in first before we contend with all of these needs -- as some of the candidates seem to be proposing and one of them, Nutter, tried to enact into law for a period going forward of 15 years -- or do we look at the budget holistically. As I've said repeatedly, I'm not against tax cuts per se; I'd actually like to have progressively structured cuts, I'm just against magical cuts that pretend to produce revenue while chasing everyone out of the city by cutting services.
And that is inherently the
And that is inherently the problem with tax cutting strategies. If they do result in positive dividends, it is down the road as the market adjusts to the new climate. That does most likely mean a temporary loss of revenue (either loss or not gaining as much).
But like you said, it is a gamble, but it is also a gamble to do something different.
Only time tells.
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Staff member of Longacre for 5th Council District.
Longacre Website
Dredge the river
The answer to poverty is jobs. The biggest area for job growth is to dredge the river and expand the ports. This is what made the City of Philadelphia and this is what will make it grow. These are good, family sustaining, union wage and benefit jobs. This is a no brainer. Some estimates say we can add up to 20,000 new jobs on the river. We will neve be Seattle or DC. What we do have is America's most inland port. Let's use what is there to grow jobs.
I completely agree with you
I completely agree with you there. The Philly port is a vital cog in economic turnaround.
One of the great advantages of Philly is the rail structure. Having a first rate port coupled with our freight lines for distribution can spark a lot of activity.
Unfortunately we need Jersey on task to do the dredging and I don't see north Jersey supporting a shipping competitor.
Also, the cruise industry would benefit. Think of the marketing "Olde City Friday, Nassau Tuesday" (or somehtign along that regards).
We have freight, highways and airport. Add in the port and we have a lot of muscle.
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Staff member of Longacre for 5th Council District.
Longacre Website
Well kids, this is where my life experience comes in handy.
Unless I missed it, no one mentioned the obvious: People who have stopped looking for work and have exhausted their unemployment benefits. Example: If I'm laid off in May, I'm not eligible for unemployment for another quarter, because I exhausted my benefits from a previous layoff. Under present standards, though, I'm not counted as unemployed - even though I am.
You're all accepting these statistics as "facts" when they are only a piece of a larger puzzle. And, if I'm not mistaken, the Bush administration actually changed these reporting standards to make their numbers look better - in which case, you're not even comparing apples to apples across the years.
Press secretary, Knox campaign. Blogger on hiatus, former award-winning journalist.
None of this explains away the basic point of the chart
that the unemployment rates -- however that term is technically defined -- in all of these jurisdictions track each other almost as if tethered during all of these years, regardless of whether tax rates are going up, down or sideways in Philadelphia. The technical definition doesn't matter since it applied to all of the rates that are being compared. So it's definitely apples and apples that we're looking at. So your candidate's insistence -- along with that of Brady and Nutter -- on cutting Philly taxes while adding all sorts of programs will only risk the future fiscal health of this city without doing a single provable thing that will help employment.
A Gold Star for Susan
Susan gets a gold star for being the first to leap for what is missing from these numbers. Here is a report that goes into other measures of the health of the Philadelphia labor market including things like the employment to population ratio. Very good stuff.
But no good deed goes unpunished, her post also reminds me of something that has been bugging me about job creation rhetoric on YPP as of late. She wrote a little while ago “Poor people want jobs. Everything else is gravy." (Susan is not the only or the worst offender on this issue).
True jobs are essential but in historical terms unemployment rates are actually pretty low in Philadelphia. There are lots of jobs in your economy. The problem is that there are lots and lots of people that can’t compete for the jobs there are. Worse still the jobs many Philadelphians can get they can’t keep and or are the kinds of jobs that leave them after five or ten years with lower inflation-adjusted wages than when they started. Don’t get me wrong volume is important but you are spitting in the wind if you don’t simultaneously grapple with overcoming the barriers that prevent some Philadelphians from looking for work and pursuing policies that facilitate the creation of more jobs that pay a living wage and or career ladders that allow people to eventually find a job that does. This is a tall task for a nation let alone a city but it seems to me you have no other choice, nobody is coming to rescue you from the Superdome.
Let me clarify that...
People want the kind of jobs that used to be available - that is, jobs on which a high-school graduate could sustain a family. That's a job with dignity.
Since the 80s, there have been several factors that changed that: manufacturing fled the Northeast and even the country, good union jobs declined and the ones that were left became less accessible, particularly to minorities.
But the single biggest change was in the percentage increase of household income that went to housing (I'm not sure but I think it went from 20% to 60%. If anyone has more specific numbers, please share them.) Home ownership became speculative in nature, and not a mere expense.
One way you can compensate for the lack of better-paying jobs is to keep working-class housing affordable. (I think all of the candidates have some variation of an affordable housing plan.)
Press secretary, Knox campaign. Blogger on hiatus, former award-winning journalist.
Price for Mayor.
Price for Mayor.
which jobs Price?
Price says:
I know it's become trendy to say there is no difference between the candidates, but Mark shows us a very clear distinction when it comes to economic development. Price says there are jobs here (and by proxy industry) and there's certainly research to support the fact that industry choses location based on infrastructure (both roads, prodduct delivery routes and the qualkity fo the workforce) more than effective tax rates.
As such, Mark, assuming there are jobs here and not enough qskilled workers, what would you do?
Would yo do this?
Or would you do this?
Or, would you this?
How about this?
The one thing I'll give Knox credit for:
I watched part of a forum with Fattah, Nutter, and Knox -- given by, I think? the Chamber of Commerce. Knox, at least, focused on crime, an educated work force, and and city services as the most important foci for attracting businesses, specifically prioritizing those issues over taxes for why the City's had trouble attracting and hold businesses. There was a direct contrast to Nutter, who insisted that tax rates is the most important factor.
That said, Knox was basically wholly unimpressive in most of the debate I watched - seemed unprepared (almost as if he hadn't thought much about he issues prior to showing up at the forum).