- Council Asks that Libraries Remain Open
- Good news! City Council stands up to the mayor, says "the public have questions!"
- Be There For Health Care Today at City Hall at noon
- City Paper on the effects of the YPP poll and other online organizing on budget cuts
- Another local library group organizes
- More Cute Kids Who Want Their Library to Stay Open
- Talk solutions with Maria Quinones-Sanchez @ PFC Meetup tonight
- Talking Out of Both Sides on Libraries
- Vince Fumo, the Charmer
- SCI Camp Hill Update—Call for Action, Increased Monitoring, Constant Vigilance
Unraveling Library Debate Reveals BPT Elimination as Real Culprit, Part Deux
Submitted by Dan U-A on Wed, 10/08/2008 - 8:29am.
Way back in 2005, a funny looking little man named Ray wrote a post titled "Unraveling Library Debate Reveals BPT Elimination as Real Culprit":
The real cause of library service reductions is the elimination of the business privilege tax. City Council, the PA Economy League, Philadelphia Forward, Young Involved Philadelphia and other proponents of conservative trickle-down economic theory have beaten the drum for tax reform for so long that the Mayor included a 3.8% reduction in business privilege taxes in this year's budget. That reduction is worth $70 million in FY 06. The Mayor’s budget is revenue neutral so that reduction will be balanced by an increase in parking taxes from 15 to 20 %.
If even a small portion of the revenue generated by a parking tax increase were given to the Free Library rather than business privilege tax reduction, full-time week-day service could be maintained and all branches could be opened on Saturdays too (the Library says this would cost about $5 million, or about 7% of the amount of BPT tax reductions proposed). Instead, cuts are being made to basic services with the vague promise that business tax breaks will eventually generate economic growth.
The reality is that the jobs and economic growth that tax reform proponents have promised haven’t emerged so far and are unlikely to start any time soon. As Professor Robert Lynch pointed out in his paper, "Rethinking Growth Strategies," local taxes are normally at the bottom of a list of criteria that businesses use when making decisions about where to locate their company. At the top of that list is location, quality of city infrastructure and service, access to roads and transportation and the quality and skills of the local workforce.
Cuts to corporate taxes causing the library to shut its doors? That could never happen! I did see something in the paper today, however, that vaguely reminded me of the post above:
The looming round of budget cuts appears to have made managers across city government jittery, particularly at the Free Library of Philadelphia, which in a cost-cutting move eliminated Saturday hours at 27 of its 53 branches over the weekend.
The libraries were reopened, for now. But who needs libraries anyway? Kids on the street can do other things to distract themselves, like go to the gym:
Recreation Department officials recently met for a presentation assessing which recreation centers could be closed or get by with reduced operating hours. For now, cost-cutting measures seemed likely to be leaving vacant positions unfilled, cutting back on part-time jobs and reducing staff at five city ice rinks.
"My theory is, if we reduce anything, we are going to be cutting services to kids at this point. We can't cut anything else," said Michael McCrea, president of the Philadelphia Recreation Advisory Council, which represents nearly 190 volunteer groups.
To McCrea and others, the discussions are uncomfortably similar to those of 2004, when proposed belt-tightening moves included closing or leasing more than 30 recreation centers, and shuttering 20 city pools and several fire stations.
What is blowing a hole in our budget? Oh, right, the business tax cuts. So, let's get this straight: in a city wracked by violence and under-education, cutting business taxes results in laying off rec center employees and shuttering libraries on the weekends?
Bottom line: Philadelphians would rather stop business tax cuts rather than cut services like these. I know that the editorial boards of the papers, especially the Inquirer, have long pushed for these cuts. But, the jig is up, the game is over, the credits have rolled. Philadelphians who can least afford it are about to be dealt a severe blow, directly related to slashing business taxes. So, I hope reporters from the Daily News and Inquirer start to ask Council and the Mayor some tough questions. For example, why, in the face of a huge majority of their citizens against them, are they taking us down this path?
City Council needs to immediately halt business tax cuts and fix this.
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Ugh
No Saturday hours? Of all the things to have to cut...
Um just to be clear
The recession we are heading into, the very serious economic downturn and resultant loss of tax revenue, the dire effects of the credit crunch, the Secretary of the Treasury begging for Congress to act on one knee. That wasn't on the table in 2005. Ray's a very smart guy but I don't think he's clairvoyant.
I have no use for clinging to rigid ideologies on any side of this. There is an excellent chance that BPT cuts may have to be suspended, regardless of what City council wants. The economic forecast for near term is downright dire but pretty clearly the budget issues the city is facing currently has to do with a lot bigger set of issues than this old bone to pick. Its not really fair to equate the two.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Well, I quoted Ray,
So how about I quote myself:
Good times.
Anyway, my self-aggrandizement aside (and yes, there are one million dumb things I said that I could also quote), now that we are all clear on what these budgets cut really entail (cuts to libraries, to rec centers, etc), I hope there is a will to stop them.
And I am glad we have at least one strong woman on Council who understands this, and who will stand up for the majority of Philadelphians.
Elementary, my dear Watson!
The real culprit is finally apprehended, red-handed!
Call Bernanke to cancel the bail-out!
Sam, are you saying that,
Sam, are you saying that, contrary to the various budget officials in our city, our shortfall isn't coming from BPT receipts? And, that it wasn't happening well before the bailout?
In fact, if there are (and there will likely be) cascading effects from the bailout and credit freeze, we haven't even really felt them yet. And what we have felt that underpins the Wall St chaos- like foreclosures and the like- we have felt for a long, long time. Well before this last round of tax cuts was locked in.
You haven't proved it was BPT cuts either
1. The golden goose for Philly city budgets for most of the Street administration was unexpected revenue in the form of real estate transfer taxes. That is something that has changed already here in Philly dramatically. Some of your own writing about the number of foreclosures the city is seeing should be proof enough to you that Philly is already feeling the bottoming out of the real estate boom.
2. Consumer confidence has been in the tank for more than a year, people paying attention to their 401(k) have seen them dropping for around 15 - 16 months easily. When people are scared, they buy less stuff and the city makes less on sales tax. Duh.
3. Oil, gas, food prices are up and have been adding to an inflationary squeeze for lots of city agencies as well as individual families driving up costs this year well before the dire problems in commercial credit markets hit.
In retrospect all of these things were indicators of the brewing storm, but the point is they are macro-economic factors that have already been wreaking havoc with the city's budget well before it became apparent how they were aspects of the serious global financial crisis that is manifesting itself more clearly right now.
Substantively BPT cuts whichever side of the issue you are on have been about competing for jobs locally and regionally. Our budget problems are hitting every county and city in the region also, so suspending cuts during the economic storm is not going to hurt Philly's competitiveness vis-a-vis surrounding counties. On the other hand, neither is it reasonable to blame city shortfalls on the BPT alone - by any sane or reasonable standard.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
A slowing economy is absolutely a cause
The City cut the BPT, right, and the assumption was, in all these debates (don't make me pull them up!) that because when we cut the BPT before and the receipts went up, the same thing would happen if we kept cutting. It has been proven untrue. And we know, from that Commie himself- Mayor Nutter- that biz tax receipts account for at least two-thirds of the shortfall in our budget. And unless we do something, our city services are going to pay the price.
Now, do other factors loom large here, like a slowing economy? Of course! But that is the point. We cut biz taxes on the assumption that receipts would just keep on climbing as we cut away. Now that it has been proven false, we are in big trouble.
And...
Yes, many things were wreaking havoc. So why the constantly rosy budget projections that showed we could cut taxes, raise services, etc. Didn't, for example, Bill Green, aggressively challenge the city's projections?
Its a matter of scale
Nobody said BPT cuts were magically make Philly immune to the biggest financial cataclysm since the Great Depression. Thats absurd. You are plainly and obviously doing a strawman the size of the Phillies stadium saying "BPT cuts didn't make Philly immune to an economic tidal wave therefore they can not under any circumstances make Philly more competitive with Chester County under any circumstances ever." That's just silly.
In terms of loss of business tax revenue, the losses are larger than the BPT cuts. Obviously in a slowing economy busiensses make less money, have less revenue, pay less taxes. Again, duh. Apples and oranges. Are intentionally trying to put up a misleading argument?
You haven't proved a damn thing vis-a-vis what would have happened minus these giant macroeconomic effects affecting the entire economy.
In terms of too rosy budget projections from February as compared to now, gee why don't you ask some of the folks working in all the banks that are failing, some of the folks seeing jobless numbers double in the last two months if the view looks different in Oct. than it did in Feb. I'm guessing across the board they will say yes.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Untrue
Here is the problem, do you think we should always assume the economy will go up? Because this...:
... has not actually been particularly felt yet, or not most of it yet. When these budget numbers came out, they came from a slowing economy, teetering on the edge of recession, not the potentially devastating melt down of the last month. No matter how much you talk about the looming crisis, it does not change that this budget crisis does not come from it. And I am sure you aren't arguing we should plan on the economy always going up?
Misleading? We cut biz taxes. Now, with a slowing economy, we have huge holes in our budget, two thirds of which are coming from a shortfall in.... biz taxes. As a result, services will be cut.
Be honest about the numbers
We cut biz taxes incrementally during a time when the economy was expanding to try make a bid for a small portion of the large growth in job numbers that counties surrounding Philly saw while Philly bucked national trends and saw local job loss. Now that the whole economy is shrinking, in the burbs, in the city, in France and in Idaho, you are saying "See we didn't do any better vis-a-vis Chester County" based on losses across the board of biz revenue that simply dwarf the incremental the cuts we made when the economy was on the upswing.
Again you are either deliberately being intellectually dishonest or fundementally missing the big picture. Philadelphia Forward people could look at the current situation in Philly compared to say California and argue that is better here because of the small BPT cuts in the boom times. The current municipal budget situation doesn't prove either side's point and it makes you look like you are being intentionally misleading to assert otherwise.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
...you are saying "See we
Nope, I didn't say that at all. And while some may have used the argument that if we cut biz taxes we will do better against Chester County, I didn't. My point was this: Cutting biz taxes were a bad move, for a number of reasons. But mostly because I thought they created very real danger of shrinking budgets, without much proof that they would actually help us. But, I don't make the policy, so away they were cut.
Now, with a slowing economy, we have a gaping hole, mostly from a lack of biz tax receipts.
And, if this was just about
...then why did we lock in ten years of tax cuts? Is a slow-down in the economy unforeseeable in those ten years? Of course not- and some people even pointed that out on Council.
And again, much of this shortfall came before the credit crisis on Wall Street. This was going to happen at some point, and now things like libraries and rec centers are dealing with the consequences of it.
OK Dan
What do incremental cuts in Philly's BPT have to do with the spending freeze at a state level? Nothing.
The same economic forces drastic fiscal rethinking of the state budget in Harrisburg are the same ones forcing similarly sweat palms on the 4th floor at City Hall. Again you taking this giant macro economic event and reducing it to your pet peeve and pretending the link proves itself. Its exactly the same jump in logic that McCain and Co. use to reduce the financial mess to just being about Fannie and Freddie.
In McCain's case the leap of logic is to blame moderate income (read black) folks getting mortgages, in your case its that BPT is the root cause of all that ails Philly's municipal budget. Both are more acts of faith than sound logical arguments.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Sean, do you plan for
Sean, do you plan for economic downturns, or not?
Huh?
Non-sequiter.
BPT cuts while the economy was growing was an investment in getting a bigger share of the regional growth the metro region was experiencing while Philly continued to suffer job loss. It was about maximizing Philly's slice of the regional economy. That has nothing to do with good times versus bad times, it has to do with economic stagnation in the city while the suburbs prospered.
Again proponents of the cuts would say Philly is in a better position now in the big picture than they might have been without them. I.E. currently our revenue from the buisnesses we have is down but that without the cuts they would still be down, just there would be less businesses in Philly as opposed to surrounding counties.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
I think you're both right.
I think you're both right.
Sean is right in that you have not proven that business tax cuts are responsible for the present budget shortfall. I don't know if you could ever prove that. While we may be taking less in related to business taxes, we're also taking much less in related to transfer tax, sales tax and hotel tax revenue.
The plain truth is that the BPT is being reduced for competitive purposes. The region, like the nation, however, is struggling with a credit crunch. Reversing the business tax cuts at this time could hit small business harder and render them unable to do business--particularly if they are unable to get credit for inventory, payroll, materials, etc. I think it is short-sighted to turn our back on a policy based upon making Philadelphia more competitive. I think it is even more short-sighted to raise business taxes at a time when small and mid-size (and even some large businesses) are struggling to make their way out of this "crisis."
Dan is right in that municipalities should plan for economic downturns. I thought we had a rainy day fund. Apparently not--or someone doesn't want to spend it.
But, planning for economic downturns isn't really what Sean was responding to. In fact, let's assume that we claw our way out of this downturn, I would hope that Philadelphia would be primed to compete for jobs and businesses to located in the city or for companies, like mine, to expand.
I want to see a competitive Philadelphia because I think jobs and job growth are important.
I also want to see a Philadelphia where libraries have Saturday hours and recreation centers are open.
The fact is, it seems everyone is tightening their belts right now.
The plain truth is that the
So you are saying that stopping tax cuts is a tax increase? Or are you referring only to the cuts we have already made?
The article you link to argues against myopeia
Patrick Kerkstra and Marcia Gelbart's Free Library story never actually references corporate business tax revenues, which are surely down -- particularly given the cuts -- as everything else is.
Dan, if the Phillies' starting lineup each owes you $10 and all of them give you only $8, it's silly to go up to Ryan Howard and say:
We have a budget crisis here! You, Ryan! You're the culprit!
Unless, of course, you ALWAYS blame Ryan Howard.
The housing market has already dipped. (Hits R.E. tax revenue.)
Unemployment is already up, business expansion is already down everywhere.
(Hits wage tax revenue, and yes hits business tax revenue.)
And yes things are going to get worse for a time that no one can accurately predict.
So, sure, let the debate begin over what will actually get cut. I say Education and successful Law Enforcement and Safety initiatives should be off the table, and the business tax cuts should not.
Let the debate actually get real once we know what the real shortfall will be.
But reaching into the budget and blaming your favorite target is not going to convince anyone, I think, that you've discovered the shortfall's culprit.
No, Marcia Gelbart and Patrick Kerkstra did not
But, Michael Nutter did:
You're kind of misquoting
You're kind of misquoting Mayor Nutter.
Mayor Nutter said this:
He didn't say due to BPT cuts are responsible. Rather, he is talking about collections. Collections and tax rate are two different things. If he meant to say tax rate, he would have said "BPT cuts are responsible." He didn't say that.
I think we know that businesses are hurting. He indicates that the weak economy has lead to a decline in business tax collections. I think we would be fooling outselves to not realize that the logic of what Nutter is actually saying makes more sense than what he isn't saying. "Weak" numbers can easily be attributed to an economic crisis and the fact that business are not as productive or are failing as a result.
Context restored
What the mayor says, more completely:
So, yes, the trend of BPT receipt shortfalls started before (even before the mayor took office), are accompanied by other tax revenue shortfalls, and -- given the economy -- likely will continue into the future. All of these shortfalls must be accounted for and then budgeted for.
In dealing with the shortfalls, the mayor is explicit also that:
As I note above, I think we should take Education and successful Law Enforcement and Safety programs and initiatives off the table.
Both caught that at the same time
Hi Gaetano. Well, you actually beat me by a minute.
Wasn't trying to be redundant.
So, then why were we told in
So, then why were we told in the Mayoral race that BPT receipts were going to keep going up? And, why in the world if this downturn was so long in coming, were we locking in tax cuts? And why did we have such rosy projections? Is Bill Green some idiot savant, or should someone be replaced on the Mayor's team?
We have locked in business tax cuts and if we did not have them scheduled, we would be in a significantly better position. That is a fact.
And as a result of said fact, despite a city that would without question tell you to stop biz taxes rather than cut services, departments like Recreation and the Library are figuring out how to reduce services. Maybe they will be spared. But, for every department that is, another will have to bear a larger burden of cuts.
Should we have less building inspections? Less trash collection? Less social workers?
The Grumpy Grammarian
Except for "trash collection," you don't mean less -- you mean fewer.
Hey, teaching writing to college freshmen is the only thing keeping me cheerful while the world collapses.
That's alright, grumpy is
That's alright, grumpy is cool. Just like Smooth John McCain:
EEEEH? EEEEH?
McCain the Patriarch
I told my friend today that McCain is daily becoming more and more like Bruce Dern's character in Big Love; the once-lovable, abusive, manipulative outcast/patriarch of his family. And his wife, daughter, and Sarah Palin are like vacant, plotting sister-wives.
My fellow prisoners, I know how to get us out of this.
OK, so, you told me all
OK, so, you told me all about RE revenue and the like. With 2/3rds of the shortfall from biz taxes, you aren't disputing that basic point, right?
Shortfalls
As has been pointed out about 20 times and about 20 times ignored, a shortfall from a sudden dramatic drop in across the board business revenue is not the same as attempting explain away a preposterously large drop as all coming from incremental rate cuts. You know it isn't the same and yet you seem more interested in grinding misleading old axes than talking about real numbers and where do we go from here.
2/3 of shortfalls from biz taxes is more directly causally related to the wider economy and could be reflection that things could actually be worse. If you are holding onto the same number of businesses and they are all doing say 15% less businesss you are actually in better shape than if they are doing 15% less business but they are are also 10% less in number. In both situations biz taxes are dropping in revenue but the second instance is worse than the first.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Ditto
Amazingly this conversation seems to all about turning a point of convergence about what we all think is best to do right now into a fight over what some of thought we should have done 3 years ago. And the problem we face now is way, way worse potentially than our differences 3 years ago.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Gross Receipts vs. Net Profits
As I hope everyone remembers, the BPT has two parts, a small tax on gross receipts and a larger tax on net profits. Over time, gross receipts have counted for a much smaller portion of the overall BPT, both because the tax rates have been steadily reduced and Philadelphia businesses have become much more profitable (at least in terms of total profits).
This means that total BPT receipts have almost always matched or beat the prior year even as gross receipts taxes have been reduced. The exceptions include the 2001-2002 recession, when the BPT had a year-to-year drop before rising the next year. It sounds as though this will be the first time we've seen consecutive year-over-year drops in total BPT revenues.
The Street administration always assumed that tax receipts next year would match receipts last year. Because receipts steadily increased, their estimates looked excessively conservative. The Nutter administration assumed that tax receipts in 2009 would match receipts in 2007. Because receipts dropped, their estimates look excessively optimistic. But they simply observed the same admittedly flawed accounting principle.
Here is the million-dollar question (literally): Is the BPT shortfall coming from a sharp drop in profits or a sharp drop in gross receipts? If it's the former, then the tax cuts don't really matter -- gross receipts and revenue from receipts could have beat expectations. If profits are down 20%, since profits make up more than 50% of the overall revenue of the tax, then revenue's going to drop 12-15%. You could try to make up for that by reversing gross receipts cuts, but that's unlikely to have a cancelling effect unless you roll back the clock a decade or more.
There's a proposed cut in profits taxes on the horizon, but it hasn't (so far as I know) taken effect yet. If profits projections are way, way down on the five-year horizon, it's a natural to freeze those cuts to keep the rate right where it is now. But where are the losses now?
This is important to reckon with both for people who like the Nutter/Goode tax proposals and want to defend them, and for people who don't like them but are serious about trying to save programs in the city's budget.
Losses in gross receipts compared to losses in net profits could be like comparing money spent on earmarks vs. money spent on Iraq; yes, this is a serious deficit, but however right you may be, halting/reversing cuts in the gross receipts BPT may be an unserious way to fix the overall budget shortfall.
I may be wrong, and the amount of business done in Philadelphia may have dropped off the map. I am willing to bet, however, that business profits are the problem, and the tax on business profits is sitting right where it was in 1996.
The Emperor Has No Clothes
Are BPT cuts the source of the city's revenue crunch? No. Just as the BPT is not the source of an end to the city's industrial economy or its population losses or its declining median wages. The BPT is a tax. A badly levied tax, perhaps, but it is just a tax.
But.
The simple reality here, that I am amazed so many people above are ignoring, is that a budget is a pretty simple document. It has a lines for total revenue and a line for total expenses. And those two lines have to zero each other out for a budget to be balanced (or the revenue side has to be higher).
When Mayor Nutter proposes a budget in January, he'll have to choose how much he wants to take away from libraries and the Dept. of Streets and the health centers and rec centers and cops and ambulances and fire companies--and bigger picture stuff--like economic development investments and CCP and more in favor of sustained BPT cuts.
Period.
For as much as some folks have accused other folks have maintaining out of touch ideologically-driven positions (stupid social justice!) I am blown away by the dyed-in-the-wool, Alex P. Keaton free marketeers in our midst. Um, remember the crisis on Wall Street? This style of economic thinking does not work.
Meanwhile, back in reality, the simple fact is that reduced hours at libraries means that less people can search and apply for jobs on free computers (employment searches constitute a huge % of FLP computer usage). And folks having less opportunity to look for work in a period of high unemployment is surely not good for a city whose revenue projections are already gloomy to say the least. Oh and it's a really good idea to take away some of the few publicly funded after school activities currently available to Philadelphia kids. Yeah that'll help diminish violence in Philly...
These are the practical implications of reduced hours at libraries.
Is Dan's post a case of the truth hurts?
Is it easier to argue picayune details and posture than acknowledge the fact that if we follow the lead of the Inky Ed Board, we'll sacrifice real and practical services (that are not even adequate to our city's needs now) in favor of--forgive me for saying it, but it's true--economic voo doo?
It is Council that will decide, and the reality is, I think they are going to choose services over sustained tax cuts. Why? Cause our city and our country is pretty screwed right now. And people are getting mad.
And remember, staving off sustained or additional tax cuts--that's only gonna be putting a couple fingers in the dike. If there was ever a clearer clarion call for a serious economic development plan--not casinos-- from City Hall ( both the Mayor's office and Council) that actually analyzed the economic situation and figured out what Philly's strengths are in dealing with it--it's now.
No matter what, a battle is brewing, and fellow progressives, you too have to decide where you stand. The sheer and utter hilarity of my supposed brothers and sisters in arms on the left supporting failed Republican tax policy is becoming less and less funny and more and more tragic.
I will tell you the truth
I'm through wasting my time with you, Ray. There are serious debates in progressive politics in this city about local taxes. And there is serious journalistic and reporting work to be done to try to figure out the exact nature of the problem and possible best fixes.
But you don't want to do that. You want to dance on everyone who disagrees with you, with bullshit calls for solidarity when you don't give a shit about that. The only side is your side. And I have apparently wasted my time here.
Good luck with this city. Philadelphia deserves better than its Democratic party. And it deserves better than its bullshit alleged progressive leadership. I'm done.
Time not wasted
Tim, your contributions here always are appreciated by me and by many others.
Whether others know it or not, because progressive Democrats are progressive, there is room among progressive Democrats for differences of opinion over issues as essential as taxes.
Those who disagree are, at a basic level, not progressive.
You are. I hope you come back. This city's Democratic party, flawed as it is, benefits from voices like yours.
If you want to get coffee sometime around UArts, give me a call: (267) 307-8821.
A question for the self-appointed Truth Merchants...
Let's turn back the clock about 15 years... What caused the near-bankruptcy that marked the beginning of the Rendell era? Was it the irresponsible tax cuts enacted during the Goode Administration?
Oh, that's right. Goode raised business taxes.
Hmmm... why after business tax increases was the City forced to cut services? Why after the City raised taxes did it find itself on the brink of bankruptcy?
According to the logic espoused by Dan's original post and Ray's inflammatory rhetoric, tax decreases are supposed to correlate with a decrease in funds available for city services.
Yet, history specifically contradicts Dan's hypothesis and Ray's alleged "truth."
Perhaps the BPT Truth Merchants will care to explain their theories in the context of the city's early-90s fiscal policies?
Well:
I guess you told me!
There is nothing above that indicates Tim, Sean, Sam or I are free-marketers. Just like, there is nothing to indicate that tax policy on the national level is blamed for the economic crisis. It fact, it is regulation, or lack of regulation, of financial institutions, lenders, etc., that allowed Wall Street to do whatever they want that put us in this mess. Not how much in taxes they pay.
This is kind of funny. I'm scratching my head about your over-reactionary call to arms. I dare to say, like Dan, you have not read the posts above. No one is asking for service cuts. Simply a recongnition that BPT cuts are not responsible for the budget shortfall. You've taken a huge leap.
You can blame the crisis
You can blame the crisis enveloping Wall Street as something that has grown our potential deficit from Nutter's first speech to yesterday, but the fact is that this was growing long before the Fannie-Freddit-AIG, etc, collapse. Do you plan for economic downturns, or not?
You are very wrapped up in the cause thing- yes, of course we understand that there are larger economic forces at play. However, let's get to the basic truth: We would not be in nearly as bad a position if we didn't have these cuts locked in.
Yes, you should always plan
Yes, you should always plan for economic downturns. To that extent, I guess I agree with Philadelphia Forward and their call for a Rainy Day Fund:
http://www.philadelphiaforward.org/node/579
I know that when I plan my budget, I include a savings for unexpected home repairs, emergencies or even worse. I think it is sound fiscal policy to have one.
Assuming we had surpluses of $100,000,000 for a decade or even five years, we'd have a nice store of funds so we wouldn't be talking about cutting services or raising taxes. We could, at the very least, weather the storm much better.
Also of note, PICA in 2000 called for the creation of a rainy day fund:
http://www.picapa.org/docs/misc_reports/Rainy.pdf
PICA's commentary is really on point.
Forget the Rainy Day Fund for a Second
On this site, Councilman Goode said that far from a rainy day fund, they were basically planning for a deficit:
Okay, for one second, I will
Okay, for one second, I will forget what is good fiscal planning to discuss your point. I don't disagree with slowing BPT tax cuts. In fact, it may be a good idea. But, we will rebound and I think we would then need to resume our policy of making Philadelphia more competitive. I do not think we should reverse any BPT tax cuts.
If Mayor Nutter negotiated 1 year contracts with Municipal unions because the budget projections were wrong or likely innaccurate, then great. That was a very responsible move on the adminstration's part, and I'm glad he is our mayor. It makes me think maybe, in a year or two when the "slowdown" is over, perhaps we can really discuss what to do with our surpluses, namely the creation of a rainy day fund. We do not have to spend every dime we have. We need to plan for the future, whether that is an economic boom or slowdown.
Dan, do you agree that a rainy day fund would be smart fiscal policy?
I think some sort of rainy
I think some sort of rainy day fund in general is fine and smart. I think the reality of implementing it in a City with so many needs will always make it tough.
However, I think we have a fundamental disagreement. You think it was responsible to, knowing that we were heading into a slowing economy and acknowledging that, cut biz taxes anyway? I don't. I mean, I certainly think Nutter just called game, set and match against Unions, who are now totally screwed. But, no, I don't think its responsible to schedule tax cuts right when you basically know you will soon have shortfalls.
An interesting statement, Gaetano
Interesting because while it wasn't the BPT cuts that degraded the economic performance of the Philly business community, without the BPT cuts the budget would, arguably, have not have fallen so far short. It is a bit of a semantic game here.
And once again, the point is that not all, but some of the folks who are now pointing to the connection between Philly's budget ratio and the national economy pooh-poohed that relationship when Stan was saying that the recent increased revenues were a product of the national economy. They argued that the recent increased revenue were a product of the BPT tax cuts; de-coupling the national economy from Philly's budget - and in contradiction to what they're saying now. (In all fairness, some of the pro BPT cutters did go less far, and merely argued that decreased BPT taxes and increased revenue are not mutually exclusive, rather than argued that decreased BPT taxes caused increased revenue.)
The logical extension of Stan's point was that if the BPT was cut, and the national economy declined, important services would have to be cut. That is, precisely, what he argued on these webpages in post after post. That is why, he argued, that cutting the BPT could be dangerous, and counterproductive to the intended outcome of the cuts - to stimulate growth in the business sector. If important services are cut to reconcile the budget, the extent to which it would damage the business environment will be, arguably, much greater than the extent to which cutting the BPT would ever benefit the business environment (xcept for a few, very large businesses). He was scorned as an old head Luddite. But it is entirely possible that as a result of cutting the BPT - meaning that there is less revenue available at this point - those cuts will be deeper and more widespread. Is it possible that even though there is an overall deficit, the cuts that were made to the BPT were offset by a stimulatory effect of the BPT cuts? I suppose, but I think no one knows the answer to that question. Which means that no one can argue that Stan was right when he said that cutting the BPT was a gamble.
Ok, water under the bridge and over the dam. But let's at least correctly assess what went down.
Ummm you guys have still flat out failed to back this up
What percentage of incremental precentage rate cuts is the overall short fall? Not one of you have answered that question and yet you seem hell bent on basing unwarranted conclusions on this profound lack of facts.
Again as a ridiculously abstracted logic problem letssay there are 2 sets of 10 businesses each paying 3% of their annual revenue into a kitty. There is some variation in the ammount of revenue the businesses make a year but for arguments sake lets say it only varies betwen each business say 8 or 9% from the average. In one set of 10 they cut the percentage you have to kick in to 2.75% and one of the businesses says "Screw this I'm going over there where they charge less" so one group now has 11 businesses contributing 2.75% and one group has 9 contributing 3%. Then there is a huge economic downturn effecting everyone and everybody sees more or less a 20% drop in revenue.
In that circumstance the group of 9 and the group of 11 would both see a dramatic drop in their biz tax revenue and it would be hard times all around but the kitty for the group of 11 would be larger than the kitty for the group of 9.
Not one thing posted in this thread has proven that the Philly despite the shortfalls is not currently in the position of the group of 11. Neither has it proved we are like the group of 11. The data is simply not there. But that has not stopped several people in this thread from charging right past that giant gaping logical flaw in their argument as if it was not there. Instead they boldly proclaim "why don't you accept the thing we already beleived as an article of faith is true is true goddammit?"
Because you have not at any point proven your case, thats why.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
ah the data
It is true Sean, in a city where it takes months to get any data from the City at all, we can't prove it.
That is a great system though. The City cuts biz taxes, even though they know the economy is starting to falter. The economy takes it effect, and the biz taxes and the future biz taxes drive us deeper in debt. And because we cannot prove it in a city where the government generally refuses to give you data, they must be right.
Again be honest
If you or I or Bill Green knew in Feb. what was going to happen in Aug. and Sept. We all could be very, very rich on short selling and Bill Green at least could have actually made piles of money on it. The truth is we didn't know.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Ignoring that you are, yet
Ignoring that you are, yet again, calling me dishonest...
What does that statement imply? Goode is saying that the Mayor knew he was going to make service cuts and ask for layoffs, but couldn't be upfront because he would have been crucified poltically. Not because he didn't know, but because it was too unpopular.
Really Goode should be responsible for his own words
Not me. It should be clear that Wilson Goode Jr. never rings me up on the cell phone and asks "Sean, what should I say to the press about XYZ subject". Just doesn't happen. If he did ever consult me on anything I might have said a thing or two to say about what not to do or say about the whole Fox 29 / Latrice Bryant mess, to be frank, saving us all a whole lot of grief.
If I were attempting to hazard an interpretation of Goode's words, it would be that they were about what was noted as a somewhat different approach to budget negotiations than either Street or Rendell practiced. Street's method was to bring in a dire budget, fight over it, squirrel away an unofficial surplus and "discover" it later for his own personal set of political goodies. That is part of the context of his comments - not that Nutter, Green and half of City Council secretly knew in february exactly the massive economic cataclysm that was going engulf the world economy invery late summer/early fall.
Despite the monomania on this board about one particular tax (which i strangely agree with Ray is "just a tax" - i.e. only one part of an overall problem the city has attracting jobs so again), Nutter got tons of flack on the other side of the budget issue for being too "lenient" with City Council in terms of demanding more severe cuts across the board.
I know I personally was called every name imaginable from people coming from that side of the issue on Phillyblog. A lot of people were calling for the city to void out its contractual commitment to cover ballooning municipal employee pensions, rather than Nutter's plan to use a municipal bond to invest and cover the city's contracts with its employees - that the city had been underfunding for years BTW- both before BPT cuts and after. A lto of people are still calling for that.
Philly Mag ran this editorial which should serve as something of a wake-up call for the problem with some of the "echo-chamber" effect that happens on this BPT issue on this forum.
For those slow on the uptake, this says the editorial staff of Philly Mag thinks Nutter should have told every single city employee "You know those great benefits you banked on balancing against a less than stellar pay rate? Guess what? We decided to break the law and your contracts and stiff you on your retirement because it would be politically popular and allow much, much more stringent BPT and wage tax cuts".
At the time I interpreted the general drift of Goode's comments as being addressed as much to those two contexts, and to the controversy surrounding that closed door meeting I remember you yelling about Dan, as having to do with the incremental BPT cuts you seem to see as the only issue that matters to you, that divides "us" vs. "them".
Again in terms of being dishonest, i flatly do think its either profoundly unrealistic and naive or dishonest to blame the moderate BPT-cuts from Feb. for the economic tidal wave that is rocking the world economy. I believe you are too smart to honestly not realize some of the logical leaps you have made in this thread, Dan. A does not equal B and even if I were to put myself in your shoes on this issue, it strikes me as deliberately misleading to blow past the giant leap that has been put forward at various times in this thread.
And I don't get the point of it. Does a cheap and profoundly misleading claim at what I would call an unjustified "I told you so" do anything to build a pragmatic coalition to deal with the situation we face now?
Really?
The politics of all this is just soooooo tone deaf. The drawing of lines in the sand sooooooo petty. If I try to think this through looking at this as an anti-BPT-cutter, it would still strike me as yes "dishonest" and ridiculously out-of-scale to what was knowable about the current economic crisis in February and what has happened since then, budgetwise. I'm left feeling more like Tim and just disgusted with the whole thing.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Sean, besides calling me a
Sean, besides calling me a liar or naive, you keep saying that no one could have seen this coming. Well, I wouldn't say that is totally true, but in any case... "this", by which you mean the bailout and credit crisis, has only just started, and what was occurring while the original 450 mil deficit was not "this," and was certainly no extraordinary fact. It was a standard downturn that some said was a recession, but by its most strict definition was not one.
And, have I blamed the BPT for the failure of the economy? Uh... No. What I said is that we cut biz taxes, and we locked in future biz taxes, which, as you know, I thought was really stupid. Now, because our taxes are lower, and the economy has predictably slowed (there are rumors that does happen sometimes), we have a greater hole in our budget, and departments are preparing to make all sorts of cuts.
If a downturn was looming or already underway, which did not take a savant to see, this was a dumb move. And, we know that at least one Councilmember warned against this very thing. And another basically said he was unsurprised, too.
Sean, I will break my policy of not responding to you
because in this case you haven't insisted on arguing strawmen, as you have in the past.
Well, not quite.
Notice the word "arguable" in the excerpt you pulled? Also, notice that I specifically stated that there is no way to determine if there was some offsetting positive benefit from cutting the BPT.
What I did say is that absent evidence one way or the other is a "gamble," to borrow Stan's terminology.
The point I've been making all along is that there were those at YPP - before you showed up - who insisted that cuts in the BPT increased tax revenue in Philly independently of an effect from national economic conditions. Consequently, I think it's pretty ironic that pro BPT cutters are now saying: "Of course we have a budget shortfall despite BPT cuts, because the national economy has declined." Once again, while previously pro BPT cutters diminished the causational role of national economic conditions on the Philly budget ratio, now I read pro BPT cutters pointing out that the national economic conditions have a causal effect on the Philly budget ratio.
But once again, what really matters at this point is where we go from here. I suppose some would resist stopping the BPT cuts, let alone reversing them. I feel strongly enough of the possibility that cutting the BPT means that we now have less money to reconcile the budget. that I have no question that rather than cut services. I'd stop the BPT cuts, and actually go so far as to reverse them.
Substantively and a briefly as possible
1. You are misstating the argument for BPT cuts. It was never that they magically disconnected Philadlephia from the national economy but they lessened very serious economic barriers to job growth between Philly and its regional neighbors neighbors. Thats not the argument that was put up, so yes its easy to push over "straw men" that were never there.
2. The scale of the budget shortfalls that have come and are coming, the scale of the global finacial crisis that arrived late summer are so completely out of scale with the effect the incremental cuts in the BPT we are aguing over that its absurd to connect the two, whichever side of the pro-BPT cuts / anti-BPT cuts you fall on. Even if you were 100% correct on BPT cuts, its nothing but profoundly insincere or profoundly naive political gamesmanship to equate the two. Apples and oranges.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Some folks have this debate turned completely upside-down
And apparently have very short memories.
Not all that long ago, Stan Shapiro was arguing for months that increased tax revenue was not the result of local business tax cuts, but a product of a growing national economy. Saying so earned him endless vitriol from BPT cutters. They explained in great detail, in post after post, how Stan had it completely wrong. They claimed vigorously that the increase in tax revenues was a direct result of tax cuts.
Price posted fancy graphs showing how Philly's tax revenues tracked the national economy, and BPT cutters explained away the obvious correlation, by claiming that the causation was actually lower business tax cuts.
Now, when it becomes completely obvious just how wrong they were, the BPT cutters are saying "But of course tax revenues follow the national economy - so you can't blame the BPT cuts for the Philly budget shortfall."
Ah yea, who says you can't have your cake and eat it too?
The point in terms of past history is that it is the same folks that are now faulting the national economy for the local problems - an obvious truth - that previously claimed that the BPT tax cut had benefits independent of the national economy.
Anti-BPT cutters are not saying now, nor have they ever said, that the BPT tax cuts have caused the budget shortfall. Talk about strawmen. They are saying now, as they said all along, that if the national economy changed, cutting the BPT would mean the need to cut local services. They said all along that it could happen that cutting the BPT would come at the expense of important services - which in the long run would do more damage to Philly's economy than the BPT ever did. Try getting businesses to move into town while we have a lower BPT and fewer police, fewer firefighters, shorter library hours. Good luck with that.
And even though Ray writes "less people" instead of "fewer people," he hits the nail right on the head. We can argue about who was right and who was wrong - the fact of the matter is that right now this City will have to cut somewhere. Libraries? Other important social services? Or tax cuts which have been proven to go disproportionately to large businesses which already have a disproportionate influence on municipal policies.
I'm sure that we can all agree that the answer is a no-brainer. Right?
Ray - you are owed an apology
By me, for teasing you for saying "less police." I'm pretty sure that you could say less police or fewer police depending on whether you are thinking of them as a whole group, or as a group of individuals. Not that anyone really cares.
As for whether anyone else owes you an apology - well, I'd say so. But accountability is a tough nut to crack sometimes.
You have an interesting scorecard, Josh
if you end up with Ray's being owed an apology.
It was Dan's grammar that was corrected, btw.
Good night.
Read the thread again, Sam
I owe Ray an apology for wrongly joshing him on his use of less rather than fewer and the realizing that depending on the usage - either is ok. And also because it's such a picayune point anyway. Whatever, it was a throwaway line, used as a rhetorical device.
No-brainer is beginning to describe this thread
Check the name of the thread Josh.
Thank you, though, for getting around to making the argument implied in much of the above discussion. You are an honest guy, even if I disagree with you on the issue at hand and your assessment of past BPT arguments
You can believe that the current budget shortfall somehow proves that cutting Philadelphia's business taxes to levels more competitive with other area municipalities, or specifically cutting the Gross Receipts tax, will or will not stimulate business investment in the city, but I do not believe that the shortfall proves any such thing. The shortfall, as we all -- I think --agree, is largely due to the sluggish larger economy. Because of the current global and national financial crisis, and particularly because of its adverse effect on lending, business investment everywhere will be retarded for awhile, so business investment in Philadelphia isn't going to be stimulated in a meaningful way soon. That does not mean that cutting Philadelphia's business taxes won't help attract investment here once businesses are spending more money again, just as it does not prove that cutting taxes will attract businesses. It simply does not prove anything about the efficacy of cutting Philadelphia business taxes at all, except that Nutter's timing was unfortunate.
You and Stan, and others who -- for whatever reasons -- are opposed to a jobs strategy that involves business tax cuts, may take the example of the current national and global financial crisis' adversely affecting business investment and BPT revenue in Philadelphia, and conclude that theonly thing that ever affects business investment in Philadelphia are national and international trends. I do not believe that is true either. I think once businesses can borrow money, so that they can expand and move, they will start assessing Philadelphia in ways similar to the way we were assessed in the past. You believe our business taxes largely don't matter, and I believe they do.
Regarding the targets for cuts because of the current shortfall, I think the business tax cuts should be on the table, and as I keep on saying, I personally would take our underfunded schools and all successful law enforcement and public safety programs off the table.
Let's see how much we have to cut and talk about it.
Sam, is the title what you
Sam, is the title what you are upset about? I thought it was funny because it was the first thing I ever read from Ray.
And yes, of course we would not be in this position if the national economy hadn't cratered. I assume that we all understand that, and that it doesn't need to be said.
And, of course, no one has ever said this:
What has been said, among other things, is that people ignored what impact national numbers had on us, that it largely benefited very large corporations, and that municipal corporate tax cuts are a not a smart way to go after job creation, for their cost, their risk, and their impact. However, whatever your opinion on tax policies, it is clear that we have a hole in the budget, much of which would not exist without these future cuts. That is simply a fact. And, with the projected deficit only climbing (like up to at least 700 mil as of today), for every department you spare, you are doubling down on others.
That said, we may still have to cut in places. The balance has to be the balance. But to me (and again, I would bet to the overwhelming majority of my fellow Philadelphians), before we cut services, we need to take stop cutting biz taxes.
Nobody disgreed with that, you just didn't say that up thread
Add the words "for now" and every single person in this thread agrees with you. Argue eroneously that the wider economic downturn proves BPT cuts can never, under any circumstances, make Philly more competitive with its immediate neighbors and its obvious you are pulling a rhetorical "bait and switch". I'm just not sure why its so important (or even particularly relevant in terms of policy) to insist on trying to prove the other point. From a practical level, it would clearly seem to be more divisive than constructive, but hey maybe thats just me.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
A couple of things
Pro-BPT cutters (or at lest reasonable ones) never said that Philly was in bubble. Of course the general trends of tax revenue reflect the national economy. That said local and regional variation on those trends are dramatic. The burbs and the metro region has shown better than national average job growth at the same periods the city has shown job loss. That problem is a combination of factors - including taxes. My biggest problem is with people on either side who think that taxes - as opposed to numbingly awful bureaucracy and a sense that things get done only "if you know someone" - are the whole picture. Far too often, for many of the anti-BPT-cutters, when it is about taxes, its not even a realistic discussion of costs vs. benefits. Its symbolic. Its about a "moral imperative" to force city government over-burdened by cuts at the Federal level be responsible for "making up" for those shortcomings - even if it is beyond Philly's capacity to address the problem.
A city's job is to run city programs well and efficiently - the types of programs that only a city can run. Schools, trash, streets, recycling, licensing, basic public safety, public transportation, rec centers. Its not to correct grand social issues that can really only be handled well at a state or federal level anyway because it will spend itself into non-existence if it tries. A city thats been broken by decades of the tap being gradually closed at the federal level can't unbreak itself all by itself - and if it tries its problems tend worsen as the tax base finds it very easy to "vote with their feet".
As such its imperative that folks on both sides of this focus on demanding that local government is transparent and predicatable, that the bureaucracy is logical and easy to navigate. That stuff really matters. Far too often the anti-BPT-cutters pooh-pooh any efforts at making municipal government more accountable, that efficiency and performance in local government isn't a significant part of the problem - that's its all about evil meanies who don't "get" poverty vs. them, the righteous. Its tiresome and petty and rings of people not doing the intellectual work of carrying their side of the argument because obviously anyone who has a different pragmatic analysis of what a city government can do versus what state and federal government can do is just not empathetic enough. I'm sorry but that whole line of attack is just childish crap and I've seen it thrown around here far, far too often.
Secondly, D.E. - no folks in this thread have specifically argued that BPT cuts are the sole or at least most significant "culprit" of the budget shortfalls the city faces - and just as I agree that considering the depth of the problems ahead scrapping cuts have to be put on the table is a "no brainer", misleading attempts to equate unrelated phenomena to settle old scores is also a "no brainer" - i.e. in the sense that it's intellectually lazy and lacking in integrity and essentially a bogus argument.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Both Good Judgement and Planning Are Important
Lower tax rates bring in less revenue relative to the size of your tax base both when the economy is expanding and when it is contracting. While the economy is growing, if the cuts in tax rates are small enough and the growth in tax base large enough, you can cut taxes and still bring in more total tax revenue.
Of course when the economy turns and the tax base shrinks, the deficit you will face is now much larger and the cuts you have to make much larger than if you hadn’t cut rates in the first place.
For this not to be true you have to believe that cuts in rates themselves generate new economic activity. I think the reality is that in general businesses add new people to payrolls when they have more customers not in response to small changes in the tax rates they face. There may be scenarios where the tax rate matters and it should be explored how to mitigate that effect but those cases are unlikely to make a meaningful impact on the overall level of economic activity.
Of course the greater danger of budgeting in a way that ignores the possibility of a recession is that you reduce revenues and postpone dealing with pressing budgetary problems until some future date. Then the future arrives.
--Mark Price
Perhaps the only reasonable "anti-" repsonse in this thread
Simply put when your metro region shows growth in times of economic expansion and you show loss its not that tax cuts "generate" economic activity, its that they make it possible to compete for economic activity, to "steal" it back. Suppose I know that the daily newspaper I subscribed to is delivered very early in the morning and I notice my neighbor is beating me out in the morning very early and picking it up before I do. If I set my alarm clock earlier to have a chance to get my newspaper before my neighbor does, I'm not asserting that some magical msytical paper-"generating" spirit exists, I'm making a measured calculated investment in how little sleep I'm willing to put up with to get the newspaper I subscribed to.
Many of us feel that in times when the economy is expanding incremental gains on reducing some biz taxes (but also on performance standarads and transparency in city government) will increase our chances of getting that newspaper, but in times of say a giant storm with gale force winds that threaten to blow the roof of our house, that beating the neighbor to the paper is not the top priority and of little consequence to either me or my neighbor.
Certain people in this thread just think the whole idea of home delivery is bad and that you should only get your news on the internet anyway and are asserting bogus claims to grind old axes.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.