Well, really, since... I mean, as I understand it, that since Council was interested in some of these restorations, the only way that could be accomplished were with some new revenue sources.
Aside from that, we probably will not be able to spend the money if we -- if these -- you know, if these increases are restored -- or I mean, if the cuts are restored.
I even understand the administration seriously looking at the proceeds from the P.I.C.A. borrowing to do the library. Oh, how did that happen? We could never have done that before. We had hearing after hearing talking about how that could never happen. All of a sudden now, oh, maybe that's a possibility. This game is really old and really 115 Whole - 5/19/05 boring and annoying. And I don't know why we got to go through it every year, other than some egotistical game we're playing back and forth that, I'm in control -- that the Mayor's in control of this process. And that's what this actually looks like to me. But it's really, really very disgusting and annoying to have to expend all that energy, to sit here now and read a letter, and to listen to other conversations that says, you know what? All those Draconian cuts we had to do, they're all coming back. How about that? It's amazing how things work.
We really won't be able to spend anything that's restored if we don't have offsetting revenues because they're just -- we would experience a deficit. And I don't think that would be good for the city's fiscal health.
Madam President, I'm done banging my head against the wall. Thank you. 116 Whole - 5/19/05
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good afternoon, Madam Director. I agree with Councilman Nutter. I'm glad he clarified the record, with regard to the fact that the city is not receiving less revenue. I can tell you that I know people who are laid off from the city. And having voted for tax cuts, I thought it was very unfair that they thought that they were laid off because the city had less revenue, which it did not. So, there's one other thing I want to clarify for the record. When you use the term "revenue neutral," what do you mean?
That there's no net change in the amount of revenue that would be collected, with one increase offsetting the other decrease.
I don't think it's a good or a bad thing. It's just an opportunity to look at the issue.
But generally when it's used, it's used as meaning a good thing. I mean, in other words, if you were a business, you would not want your year to end revenue neutral. If you're making an investment, you don't want that investment to be revenue neutral. In the end, it's a budgetary term usually used by people in government who want to make sure that they can pay the bills with the tax revenue that they have. But you would not use the term revenue neutral when considering an investment. You would not want an investment to be revenue neutral.
This was a slightly different situation, in which we could decrease an unpopular business tax by increasing a tax that's paid by a more general group. Not popular either, but, you know, it's a trade-off. 118 Whole - 5/19/05
That is a term that actually predates you, in terms of your tenure. It's a term that has been used for the last two or three years. And it's a budgetary term. It's a finance term, in terms of public finance. But it's not something that you would consider when making an investment. You would not want that investment to be revenue neutral. Everyone wants to enhance revenue. They want to gain revenue. They want to make an investment that's going to grow revenue. So, you never, when you use a term revenue neutral, are you referring to anything that should be considered an investment.
Well, tax cuts are very much about the private sector; is that correct?
Well, not all taxes affect the private sector. 119 Whole - 5/19/05
When we're talking about the wage tax, talking about business tax, you're talking about people generally, most of them which are employed in the private sector, and businesses that operate in the private sector, and the revenue that comes from that. And the reason why we would do tax cuts at all would be as an investment.
Yes. Because it allows us to provide city services that would support the quality of life that would create the right environment for business growth, yes.
At this point I'm not taking any position on any particular tax bill, nor am I talking about stuff that is just before us. I'm saying in general, as you spoke to Councilman Nutter's questions about what happened in the mid '90s, up until this point in our reduction of wage and business taxes, you essentially said it was a good investment. 120 Whole - 5/19/05
I think it looks as if it's turning out to be a good investment, yes, but it was a risk at the time.
But it was not an investment that was meant to be revenue neutral.
No. I mean, it had to accommodate some growth because the expenditure side continues to, you know, increase.
My point is, you would never use the term revenue neutral when discussing an investment.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. I'll try to be brief. Now, Ms. Reed, let's talk about what you generally don't want to talk about. What 121 Whole - 5/19/05 has been the impact on the budget in our ability to provide services by the decision that was made with regard to foregoing the $18 million from P.G.W.? Did that have any impact on the city's budget?
A hit on the budget; but, you know, it had to be considered with respect to other actions that had to be taken of value, such as helping P.G.W. --
I understand that. I'm not... You know, I'm not saying that it was a wrong public policy decision. We don't have to have that dispute. I want to know: Did that decision negatively impact the budget of the city in its ability to provide services? Yes or no?
I would say yes; but, you 122 Whole - 5/19/05 know, it was accommodated in other ways. I wasn't here at the time, so I can't say exactly how it was affected, but...
Yes, that was money that would not be available to provide services --
So when you -- And I use the you as a bit of a royal you. When you complain about the tax cuts by this Council, which of course we did not make by ourselves, when you complain about the tax cuts and the impact on city services, why do you neglect to mention that you gave up $18 million, albeit for a good cause, but you gave up $18 million that also has a negative impact on the city budget. Why don't you mention that?
I don't think that's any secret. I mean, it is in the documentation, but what we're hoping now is that --
No, it's not a secret. No, I don't see it listed in the litany of things that impact the city budget. All I ever read about in testimony, in speeches, in statements in the newspaper is about tax cuts. Now, we know from our previous exercise that tax cuts have not led to less revenue, right?
We know that forgiving the $18 million from P.G.W. has led to less revenue, right?
Okay. Now, it was before your time, but you're aware that the Mayor did sign into law a wage tax bill, 020092, on April 23, 2002. You're aware of that, right?
And are you 124 Whole - 5/19/05 aware that the most recent wage tax bill, 040607, that was signed by the Mayor on July 1, 2004. Are you aware of that?
Okay. So, Council can pass bills, but ultimately the Mayor pretty much gets the last say, to some extent, right?
Yes. He can either sign them or veto them or let them pass without signature, correct. Yeah.
Okay. But when you sign a bill, would you agree that if you sign a bill, you don't necessarily then have the right to complain about its impact?
You're right. I mean, we just had to live with the consequences of the choices that we made, and... You know.
Right. Okay. Now, what's been the impact on the budget over the years of the Safe Streets Program, 125 Whole - 5/19/05 how much has that cost?
Okay. From the responses from budget season, we received the following information: From FY'02 through FY'05, the overtime cost for the Safe Streets Program are $77,276,696.11. What do you think the impact has been on the city budget as a result of that decision?
Well, I would say probably the effect of that is really seen through the increased property values, and so would be recognized across the entire range of tax sources, because the quality of life in the city improved as a result of Safe Streets.
Well, the property values in all the areas where Safe Streets programs were, I think had been shown -- I've seen some geo statistical maps that the changes in 126 Whole - 5/19/05 property values in all those areas are coming up as well as in the city as a whole.
Well, I didn't know that the Safe Streets Program was primarily focused on raising property values.
I thought the Safe Streets Program was primarily focused on crime reduction.
It was. But I do think that the fact that it improved the quality of life in neighborhoods has meant that property values have gone up spontaneously.
Has the Safe Streets Program been functioning in all the neighborhoods across the city in an equal fashion? And that's, I mean, that's what's driving property values in Fairmount or East Falls or... I mean, I don't think --
Most of those neighborhoods have benefited from Safe Streets --
-- where the most crime is. And it is helping to stabilize those areas.
And, you know, not all property is worth the same across the city either.
Yeah. Now, but it is $77 million out of the city budget for overtime for that program. And you don't mention that as a part of one of the components of the additional costs of government that may lead to a decline in other services in other parts of the government. I mean, you didn't have an extra $77 million sitting somewhere for that purpose. It came from somewhere, right?
That was a 128 Whole - 5/19/05 choice. You made a choice.
Okay. And we've also had an increase in pension costs; is that correct?
I understand that. And we've had an increase in health care costs.
Right. Debt service is up. Over the past four or five years, I think we've had a report from the Controller's Office regarding increased debt.
Our overall debt costs, aren't they up? 129 Whole - 5/19/05
Okay. Where does the $4 million come from that we're spending on legal defense in the federal corruption investigation? Where does that come from?
That's a case where we do have an indemnity fund to try to pay for that. The cost of the federal investigations is exceeding budget estimates. So, it's difficult to try to figure out how to fund those costs which we must fund.
But those are General Fund dollars that are then not 130 Whole - 5/19/05 available for city services, right?
To the extent that we might take them for such a budget line, but I don't think that they end up actually affecting services. That...
Well, if we didn't have the federal corruption investigation, and if we weren't paying for the all legal services, then the Law Department wouldn't spend the $4 million for outside counsel, and they'd probably use it in the General Fund, right?
Okay. I mean, the point of all this, as I'm sure you figured out, there are spending choices that have been made that also drive up the cost of government, as compared to the sole highlighted issue which is the reduction in taxes. And all I'm saying to you is, if we're going to have an honest, legitimate discussion about this, I think it is disingenuous to solely point to the reason 131 Whole - 5/19/05 that there might be some proposal to reduce services. And as laid out by Councilman Kenney, all of a sudden most of them are going to be put back anyway. But if the city administration wants to explain to the public -- If you want to be honest with the public about what's going on, don't only highlight what we've done on the tax side, putting aside the fact that it doesn't make your argument anyway. But there are spending choices that have been made. There are some circumstances that we can't control, all of which lead to less money available for city services. Now, you'd have to agree with that, wouldn't you?
Yes, sir. Thank you. Thank you very much. Are there any other questions or 132 Whole - 5/19/05 comments of this witness? (No response.)
Thank you very much. Is there anyone else to testify? Good afternoon. Please identify yourself for the record and proceed with your testimony.
Madam President, members of City Council, I am Bret Mandel, Executive Director of Philadelphia Forward. And I probably do not have to tell you that I come before you today to urge you to eliminate the job-killing Business Privilege Tax to grow jobs in Philadelphia. I do not have to tell you that in my lifetime high and unfair taxes have contributed to the loss of more than 250,000 jobs or the fact that Philadelphia County lost more jobs than any county in the United States last year, with the exception of Detroit's host county. In its ranking of the best places for doing business in America, Inc. Magazine 133 Whole - 5/19/05 determined that Philadelphia ranked 265th out of 274 places, and said of us, the city's high business taxes, poor level of public service, crummy public schools, and reputation for political corruption continue to chase businesses to the neighboring suburbs. I also don't have to tell you that in the past decade we have reduced tax rates each year, but we have increased tax revenues. The research performed by Wharton's Robert Inman for the Street administration demonstrates that our recent tax reductions are responsible for preserving more than 22,000 jobs over the last decade. You know, it's also unheard of to tax businesses locally the way we do in Philadelphia. We tax every dollar in city gross receipts the business takes in, even if it is not making a profit. 5 percent. Additionally, this tax is imposed in 134 Whole - 5/19/05 such a way that sole proprietors and partnerships actually pay an effective tax rate that is higher than their corporate competitors. You also know that the Tax Reform Commission concluded that we should phase out this tax and eliminate all its problems. You don't need to hear all this from me again, so let me tell you a few simple stories that I have collected as part of Philadelphia Forward's work and then serenade you. One responder wrote: I run a small electric business with two employees. This is my fourth year in business in the city since I broke away from my father's company. T. from my accountant in the mail this morning, I know why my father chose to move his business out of the city. It makes me want to leave the city. I love life in the city but can't justify the high taxation. Another wrote: In 2003 my partner and I turned a dusty, shuttered shop front on 135 Whole - 5/19/05 Emlen Street into a viable, small restaurant, doing much of the construction ourselves. In just four months and with only $78,000, we employed eight workers all living in Ms. Reed Miller's district for most of last year. Now they're all jobless. This is a shame. Why did we close our doors and put the place on the market? Philly business permits, fees and taxes. The Mayor's hand-picked transition team, the 21st Century Review Forum, declared the Mayor's very important quality of life strategies will not have the desired impacts or be sustainable in the long run in the absence of fundamental tax reform. Some will question whether the city can afford significant tax reform at this time. But that is the wrong question. Rather, we should ask how we can afford not to reform our taxes now. I could not have said it better myself. The Tax Reform Commission estimated that its recommendation will mean 47,000 jobs 136 Whole - 5/19/05 for Philadelphia by 2010. If there is another plan on the table to grow 47,000 jobs in the coming years, let's debate its merits. But we cannot accept the excuse that we cannot afford to enact the tax reform package. Truly, we cannot afford not to do it. I urge you to take action today and eliminate the job-killing Business Privilege Tax. But it's been a long day, and it will be a long night. So how about I lighten the mood a bit and serenade you. I'm going to sing backup instead of lead. ) I hope that helps gets you through this long day.
Thank you. All right. Do we have any other witnesses that would like to testify? 137 Whole - 5/19/05 Please approach the witness table.
Thank you, Councilwoman. We're the "One Philadelphia Dancers" here to perform for you today. My name is Sharon Ward. I am the Child Care Policy and Advocacy Director for Philadelphia Citizens for Children and Youth and Co-chair of One Philadelphia. We're here today to testify very briefly on the tax bills. We thank you very much for having this additional opportunity to testify on the budget and tax bills. We know that there are a few members here who we haven't seen before. We're happy to see Councilwoman Krajewski back. Just want to make a few points. We're here today to speak in opposition to Councilman Nutter's bill, 040767, and in opposition to the budget. We'd like to make a few recommendations for Council as you move towards deliberations on the budget and tax bills. 138 Whole - 5/19/05 The first is that we ask you to restore the tax cuts -- to restore the budget cuts first. We think that the city really cannot bear the kinds of cuts that we're seeing this year in libraries and recreation centers, and other things. We also want to remind you that there are a variety of cuts in services, including health care services, that have not drawn a lot of attention, that have not brought a lot of people out to speak, but those are still as significant as the ones that you have heard thousands of people speak about. If you do anything, we just want to ask you -- And this is apropos to the dialogue that was just had with Councilman Nutter and with Councilman Goode and Budget Director Reed -- that we think it's critical that at least this year Council begins to understand that there is a link between tax cuts and cuts in services. I want to make a very important point. And this is not a point that we make 139 Whole - 5/19/05 as One Philadelphia, and it's certainly not a point that you've heard from the administration, but it is a point that was made by the Tax Reform Commission and E-Consult, their consultants. You can cut taxes, and those tax cuts will simply not pay for themselves. This Council may elect to cut taxes, but it will never generate enough revenues to pay for the tax cuts. Most economists would argue that tax cuts will bring in at very best $2 for every $10 that are spent. So, to Councilman Goode's question about return on investment in the private sector, there is no return on investment here. You spend money to pay for tax cuts. The question is then, how do you pay for those tax cuts? Many cities that have enacted tax cuts pay for them through service cuts. And that's the second point that needs to be remembered. Economists, including E-Consult, have said that tax cuts that cause cuts in 140 Whole - 5/19/05 services have no good economic benefit. So what we have here is a situation in which we are taking the most costly approach to dealing with the city's economy, which is to give everyone a tax cut, something that will cost millions, if not billions, of dollars in order to influence behavior of a few people and without considering other alternatives. There are four other things that have been raised as critical issues that affect business location decisions in this city. They include dealing with L & I and zoning. They include access to capital. They include access to work force. Nobody has paid attention to those issues. Bret said there needs to be another alternative on the table. That's absolutely true. But before we spend $2 billion on tax cuts, we need to look at the other alternatives. We need to consider them. The final thing that economists have said is that what actually has been proven to work in building the economies of cities like 141 Whole - 5/19/05 Philadelphia's is not tax cuts but spending. Investments make a difference. They produce a better return on investment than tax cuts. So, it's critical. This body may decide that it wants to cut taxes.
But please be assured that that will be done by -- and it will be paid for, and it will be instead of improving and supporting services, and it is very likely to result, as the Tax Reform Commission also indicated, in increases in property taxes. So, the people who will be paying for this tax cut are people who live in row houses in Philadelphia. And this body will have to decide that a 33 percent property tax increase in Fishtown is something that they are willing to support to pay for the tax cuts. This is about -- As was mentioned earlier, this is about choices. You have three of them. You can cut taxes, you can improve services, or you can maintain property taxes at a reasonable level. You can't do all three. Thank you. 142 Whole - 5/19/05
Thank you very much. Our next witness, please. Identify yourself for the record.
Good afternoon. My name is Andre Butler, and I'm from the Philadelphia Unemployment Project, also a coalition member of One Philadelphia. I'm thankful to be here again with the privilege to speak to this body of legislators, the City Council. And I have a couple of quick comments. I want to say I'm glad, as Ms. Ward said, that we see other Council members here today that were here the last time that we spoke, one of which is Councilman Cohen who made it very clear the first time I was here that he felt that the Tax Reform Commission suggestion of a Business Privilege Tax cut may have been the same thing or similar to the George Bush Republican tax giveaway which was a very powerful statement. And just to reiterate that, we see no difference. It's the same thing. 143 Whole - 5/19/05 The Business Privilege Tax cut very simply was going to affect every -- would affect revenues to every department in the city. And we have to remember who is making the suggestion of that. And that's the wealthy people of this city. They're the ones that can afford a tax cut. Because they can either afford to either live over the tax cut by living in a better part of the city or live in a better suburb. They don't need a good police force. They can afford to hire the best security for their own homes, or go live in the suburbs where they think it's safer. They don't need to have the best fire protection for their home or business in the city. They can afford to either buy the best for their home or business or live in the suburban community. They don't need a good library system in this city. They can afford to send their children to a private school or to live 144 Whole - 5/19/05 outside the city and work in the city. They don't need to have, necessarily, to have a good Streets Department to pick up trash that they have received. They can afford to do the trash themselves. The business communities is what is asking for this tax cut for the elimination, because they can afford to live over the tax cut. The regular common folk cannot afford to do that. I just left the law firm Lineberger and Goggin that's involved in collecting the back property taxes in this city. We're trying to get deals for people who are behind in their taxes, who want to pay their taxes but who want to also be able to live at a decent -- have a decent standard of living. They're being forced in some cases to sign deals of paying $2,000, $3,000 down and $500 a month just to pay their back taxes. They're only making $1,000 a month, some of them. That's all they're making as 145 Whole - 5/19/05 gross income. They're being forced to give up all of their money for taxes. And this body is talking about our Business Privilege Tax cut. Think of that the next time you give Comcast a big break. Think of it the next time this body decides to pay its share for two new stadiums we couldn't have afforded back then. Think of that the next time you make those kind of irrational decisions. The regular common people of this city cannot afford a B.P.T. reduction. You also have to remember that the Tax Reform Commission suggested if we eliminate the Business Privilege Tax we're going to have to raise property taxes. That's in writing. The city already has 1,000 or more sheriff sales a month. That's just for mortgages, not counting that there are now two tax lien sales a month. We have two tax lien sales plus one foreclosure sheriff's sale. And all those people, most of them, come to our offices for help. We have to try 146 Whole - 5/19/05 to work deals for them over -- either with their lenders or the mortgage company, something to get them to be able to pay their taxes and live at a respectable, decent living. So I ask this body to think about the common folk, the regular people, on which the back of the city is built. Think of that if we decide to eliminate and cut services and cut taxes, which is going to cut services. Think about the regular common people in this city. Thank you.
Good afternoon. I'm Stan Shapiro. I'm the coordinator of One Philadelphia. I'm glad to see many of you folks again. Bret Mandel asked, what are we going to do if not this, to create 46,000 jobs? The answer is the answer that a doctor gives to a patient: First do no harm. And cutting these taxes puts the city at risk with no firm basis for knowing 147 Whole - 5/19/05 that those risks are not going to come into effect. The Tax Reform Commission said that without this Council doing anything to raise real estate taxes, real estate values will go up at a far faster rate than they would otherwise, without a Business Privilege Tax cut, and that the only way that a Business Privilege Tax cut can be revenue neutral at best is if this Council allows those increases in real estate tax values not to be translated into higher real estate tax revenues. So, this Council would not be able to respond to all of the complaints from the neighborhoods about their automatically increasing real estate taxes or else the revenue shortages are guaranteed even by the Tax Reform Commission. It is not we who are saying there are going to be revenue shortages. It's the Tax Reform Commission that says there will be revenue shortages unless this Council allows real estate taxes to go through the roof by 148 Whole - 5/19/05 doing nothing. And maybe this Council will want to do that or the next Council. But I know that it is very difficult and it is justifiably difficult for Council to, in fact, allow more of our homeowners to be under the gun because of real estate taxes that they cannot afford. And furthermore, the real estate tax is imposed on a flawed model, one which imposes higher values on low income owners, as opposed to high income owners. So that the rate increases will be inherently unequal, inherently unfair, and yet absolutely necessary to make up for the lost revenue from the Business Privilege Tax. So, this is a lemon of an idea. That's why you all will find some lemons on your tables. We don't have any other entertainment for you. We don't actually think that this is an entertaining idea. And we think that we need to seriously think about what to do to continue to grow the city. But first, we don't want to do any harm. 149 Whole - 5/19/05 Thank you.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. During the testimony there was some reference to comments I made. I don't know what it was. But what was interesting about it, I did sit down with One Philadelphia to discuss this whole issue, the fact that I thought that it was too philosophically driven and not getting down to issues where we could find common ground which include terminology. And my suggestion at that point in that meeting was that we not discuss the issue of tax cuts, rather than tax reform. The issue here today is tax reform. Not only is the term tax cuts being used but the terminology paying for tax cuts. I don't understand how you pay for tax cuts. How do you pay for tax cuts? See, we can't communicate unless what you're 150 Whole - 5/19/05 saying makes sense to me.
Well, excuse me, I would like to ask Councilman Goode, how do you call tax reform eliminating a tax?
I asked you a question. I'm the one asking the questions here.
Excuse me, sir. The Councilman is speaking. Would you wait until he's finished? And then you can reply.
Question is simply, how do you pay for tax cuts? I need to understand that terminology.
Councilman, it's an important question. And actually, there 151 Whole - 5/19/05 are -- On a number of levels of government there are actually documents that track tax expenditures. That is well established that a tax cut is considered to be spending of today's dollars. So, for example, on the federal level they do actually track tax expenditures. If they cut taxes for pork bellies in Chicago, they track what the loss of revenues will be for that. So, what that means is, for example, and how you pay for it, is that if I have $10,000 of income today, and I pay seven percent tax on it, next year I pay five percent tax on it. Then the taxing body's going to get two percent less. They have to come up with dollars to pay for that. But let me point out to you again --
You know what? That makes a whole lot of sense. And I'm glad you explained that.
So, if we keep the revenue level the same, and it's revenue 152 Whole - 5/19/05 neutral, but beyond that there's actually some revenue growth, we could dedicate that to tax cuts, and we would both be doing something that is revenue neutral and paying for tax cuts. Is that correct?
Yes, that's true, Councilman. But what that also means is that if you dedicate that revenue -- That assumes that there's revenue growth, because what I'm saying --
Well, we're not assuming because we know that there's revenue growth.
There is revenue growth, but you can't necessarily say that the revenue growth is due to the tax cuts.
You absolutely can say, after examining it over a ten-year period, that there's continued revenue growth, there's going to be continued revenue growth. Even the Budget Director who is against tax reform will tell you there's going to be continued revenue growth. The issue is whether, if you hold 153 Whole - 5/19/05 revenue steady and then invested all additional revenue that's coming in, as you say, to pay for tax cuts, then you would in fact be paying for tax cuts.
Two points. One is, I would dispute the argument that -- or dispute the contention that the tax cuts cause the revenue growth. I want to point out that the '90s were a time --
That's a philosophical argument. And I'm not here to debate philosophy. I really asked you a question about what you meant by paying for tax cuts.
And when you're talking about paying for tax cuts from existing revenue or paying for tax cuts from revenue growth, I don't believe there's a bill before us or a bill even as amended before us this year that deals with this budget or the next budget or the future budget in terms of tax reform or what you refer to as tax cuts that cannot be paid for 154 Whole - 5/19/05 ten times over with revenue growth. That's already been demonstrated over the last ten years.
Councilman, I certainly would acknowledge your contention on that. I would simply say that the Tax Reform Commission said that in this city 50 percent -- that there would be a 50 percent reduction in the -- or there would be 50 percent less income generated from the tax cuts than was lost. And therefore, it would need to be paid for some other way. And their suggestion was an increase in real estate taxes would do that. So, again, that's not my position. That is their position.
Well, whether it's real estate tax revenue growth or whether it's Business Privilege Tax revenue growth, whether it's wage tax revenue growth, you would agree that if there is additional revenue growth, then -- and that the cost, as you put it, for paying for tax cuts does not 155 Whole - 5/19/05 come from existing revenue but from revenue growth, then you're paying for it from growth.
I would argue, Councilman, that if there is growth... I mean, again...
There is growth. It's been documented today, and it's a part of this record.
I'd like to offer, perhaps, a perspective on that. If there is -- If there is revenue growth, then there are choices. Then the Council could choose to cut taxes or it could choose to increase services. We actually think that... Right?
You could some of both, yes. I think those are the choices that the Council would have under those circumstances.
But what I'm trying to avoid is people believing that we're, quote unquote, paying for tax cuts out 156 Whole - 5/19/05 of what was the existing revenue levels because that is not true.
No. I think what we're trying to communicate is that, given the tremendously sharp tax cuts that are on the table, that that --
They could change any minute. And we understand that there's some talk about some changes. But the particular tax cuts that are on the table would actually cut revenues, and therefore would have to be paid for. Now, if economic theory, which was not even adopted by the Tax Reform Commission, produces more revenue than is lost, which no one is actually predicting...
I'm not talking about economic theory. I'm not talking about philosophy. I'm not interested in debate over that. I'm talking about real money that exceeds revenue projections, real money that 157 Whole - 5/19/05 exceeded revenue projections over the last ten years, real revenue growth at the same time that tax reform and tax cuts, as you call them, existed. And so, there actually has been an increase in revenue, will be an increase in revenue above existing revenue levels. Therefore, there is money for a decision to be made about. And it is a decision about whether you invest in services, you invest in tax reform, you invest in both. And I understand your argument about investing in services. I'm not necessarily going to say you're wrong. But I don't like the suggestion that we are paying for tax cuts, as you say, and assuming that it's coming from existing revenue that existed and not from the growth that we have achieved.
All right. I think to have a complete answer to that, you'd also have to compare the growth in city expenditures, because there is an inflationary factor. 158 Whole - 5/19/05 So that if the revenues that have been coming in have been increasing at a lower rate, which Ms. Reed also suggested when she first testified, then they may not have been keeping up with the demand for services. So, there may not -- There may not have been money available for tax cuts. Those revenue increases may have been needed to maintain services.
I don't disagree with you. My point is that if there's additional revenue growth, we then make a decision how we want to invest it, but that to suggest that tax cuts are being paid out of existing revenue or existing revenue levels that were set the year before just simply isn't true. It's equally untrue as to suggest that less tax cuts means less revenue. Less tax cuts has not meant less revenue.
We agree that it has not meant less revenue than prior years, but 159 Whole - 5/19/05 I think we have a disagreement -- we may have a disagreement over whether or not it meant less revenue than we otherwise would have had, and whether or not that wound up being a good choice because those tax cuts did more good than maintaining services or increasing services would have done. We would tend to think that increasing services would have been a better way to keep population and keep businesses.
I'm not going to take a position, agree or disagree because, as I said, it's not a philosophical debate for me. It's really just trying to clarify the record, in terms of what you mean by pay for tax cuts, just like I asked the Budget Director what she meant by revenue neutral. They can be very misleading terms. Thank you.
The Chair 160 Whole - 5/19/05 recognizes Councilman Nutter, and then Councilman Kenney.
Thank you, Madam Chair. There's been a lot of mention of different components from members at the table about what the Tax Reform Commission recommended. Can we at least agree that the Tax Reform Commission made Recommendation Number which is the incremental elimination of 13 the Business Privilege Tax? Would you at 14 least agree to that? 15
Yes, but without 17 context it really doesn't state the full 18 picture of what they said. 19
The context is, 20 Recommendation Number 23, incremental 21 elimination of the Business Privilege Tax. 22 And they have a schedule that they 23 recommended, showing the elimination of the tax in 2015. The bill in front of us recommends the elimination in 2017. 161 Whole - 5/19/05 Whatever the context is, there is a recommendation. You've referenced the Tax Reform Commission report on any number of occasions to bolster your argument. I'd at least like you to recognize and agree that there is a recommendation in their report proposing to do that.
Can we at least agree on the rather simple things first?
One of the criticisms of the Tax Reform Commission's charge was that its charge was to look at cutting taxes. So, it would have been astounding --
That's what a Tax Reform Commission does, and that's what the voters asked them to do. That was their charge. It was to lower the overall tax burden on Philadelphians. That was their charge, and I think they did their job. 162 Whole - 5/19/05
And their recommendation was that you could do that, assuming that you allowed real estate values to increase drastically, and you did nothing to stop the increase in real estate taxes. I think they said that if you had the courage to do that. I think those were the words they used.
That was not their recommendation. What they said was: If all other revenue generating options failed, and there was no other way to fund the Commission's recommended package of tax reform, the city could increase property-based tax rates. That's what they said.
I'm not aware that there are other revenue-raising measures that have been suggested.
They suggested a number of them in their report. That would be in the...
...volume one 163 Whole - 5/19/05 there was a whole series of recommendations for revenue enhancements. That's from the report.
I'm not aware that they are before the Council at this moment.
I'm not aware that those recommendations are before the council at this moment, other than increases in the parking tax which would compensate for part of the reduction in the business privilege tax.
So that we think that things have to be done in a package as the reform commission recommended. If anything is going to be done at all.
Well, that's the wonderful thing about the tax reform commission. It was advisory in nature and we actually have the job and the responsibility of taking action. We've taken some action on these particular matters. 164 Whole - 5/19/05 Let me ask this question: Ms. Ward, you made reference to... and I didn't understand the context... $2 billion in tax cuts. What is it that you're talking about?
Councilman, my recollection of the cumulative cost of the Business Privilege Tax elimination over the years was about $2 billion. I could be 10 off on that. But it's certainly well into 11 the billions of dollars. 12
Yeah. Okay. 13 Do you know what the cost of the 14 proposed tax bill in front of us and the 15 amendments that have been circulated that go 16 with it? Do you know what those costs are? 17
I have received a copy of the proposed amendments to the bill and the revenue projections or the fiscal impact. So, yes, over the first five years of the bill would be $14 million.
Okay. Do you 165 Whole - 5/19/05 think that will send the city into fiscal collapse?
No, I don't, Councilman; but one of the things that we have argued here is that the city needs to find dollars just to pay for things that have been cut in this budget. And we would also like to argue that --
Apparently all the things that have been proposed to be cut, looks like they're coming back.
Well, there are -- Councilman, part of this is about an acceleration in an already existing reduction in taxes. So, I guess part of the question might also be, why bother to do an additional $600,000 worth of tax reduction when there's already a schedule of tax reduction that's in place.
Well, there's no 23 scheduled reduction in the net income portion of the Business Privilege Tax. We're in the soon-to-be third year of a five-year cut in 166 Whole - 5/19/05 the gross receipts portion of the Business Privilege Tax. And if you want to send the right message, I think you at least seek to guarantee five more years of stable, consistent cuts, in an effort to demonstrate a commitment to try to make the city a place where people want to stay or locate their businesses. I mean, as much as I believe in services, I'd at least state, respectfully, that what a lot of people need are jobs. Would you agree or disagree?
Do you have a proposal to help improve the climate here, that people would want to stay or grow their businesses so people can get jobs and be less dependent?
And this is a proposal that is backed up by economists who have looked at this issue. They argued that investments in quality of life, that people want to live in a city, and investments and things like infrastructure are more effective ways of improving business climate and attracting business to a city.
Okay. Was the Mayor wrong to sign the tax cut bills that have been put into effect?
Was the Mayor wrong to sign the two tax bill cuts that have been put into effect?
Well, the Mayor signed tax cut bills and proposed a budget that cut the libraries. So, that was -- that -- the Mayor will have to answer the question about whether he was wrong to do that.
I'm talking about in 2002 and in 2004. Was the Mayor wrong to sign the bills that reduced the wage 168 Whole - 5/19/05 tax?
We haven't taken an organizational position which looks back.