They're growing much more 16 slowly. In fact, the wage taxes have only grown 17 0.6 percent year-to-date, and the business- 18 privilege tax has actually decreased from last year.
But we haven't seen a decline. It's still growing, but not at the rate it grew --
Well, for the business-privilege tax, so far this year, we've actually seen a decline, and the wage tax has 135 5/15/02 WHOLE - BILL 020309 actually been flat.
Flat. But it's accurate to say that since 1995, over a seven-year period, while we enacted the wage-tax reductions, the incremental wage-tax reductions by percent or 7 so, we did see an actual increase in growth 8 revenues in the general vicinity of about 18 percent.
That's true. I should add, though, that that was during the longest economic expansion in the Country's history, and cities around the country had growth in revenue --
You don't think that in any way, shape, or form, the reduction in wage taxes had any bearing on the increase in revenue, in the perception at least that the City of Philadelphia is doing the right thing by getting its fiscal house in order, that it in any way it stimulated economic growth? You do not attribute any of that 18 percent to the wage-tax reduction?
No, I completely agree that the cuts in the wage tax has a positive impact on our economy, but I don't think that we can say that the whole increase can be tied to tax reductions. 136 5/15/02 WHOLE - BILL 020309 I think we have to look at a number of issues, and I think the key issue really was the performance of the national economy.
Okay. And I will agree with you that the national economy had some bearing on that, but you're also saying that wage-tax reductions did, in fact, have some influence on the revenue growth.
Why do you not think that that would not be the same thing going forward with this bill?
I don't think that the wage-tax reductions alone come close to making up the amount of revenue that we lose, and the problem that we create in the budget is that we have to find ways to fill that gap.
Are you suggesting, then, that we always look at the national trend and base our wage-tax projections or recommendations or our legislation based on what the national economy does?
No. What I'm saying is that I don't think you can say, Look, there was an 137 5/15/02 WHOLE - BILL 020309 percent reduction in the wage tax, a percent increase in tax revenues, and that means that the 8 percent tax reduction led to that. 5
I agree with you 6 there, but don't you think there's a portion of 7 that -- I mean, I hear you saying that you do 8 believe that the wage-tax reductions has, in 9 effect, been a positive influence on growth 10 revenues. 11
Yes, that's right. I mean, 12 I don't think it's -- I don't think that it covers 13 itself, I don't think it comes close to covering 14 itself. 15 And one of the things that economists 16 have told us when we talk about the supply-side 17 effect, which is what I think you're talking about, is that we should not budget any supply-side effect, that that would not be responsible budgeting.
I have another question, but I'm going to hold off for a moment, Madam President. Thank you.
Thank you. Are there any other questions from 138 5/15/02 WHOLE - BILL 020309 members of the committee? Mr. Dubow, what impact would this bill 4 have on the City's Five-Year Plan? And would we be required to amend it?
The Five-Year Plan that Council approved by resolution, I guess, two weeks ago, three weeks ago, is now in front of the PICA Board. This act would change our revenue projections, so we would have to go back and change that plan to reflect the lower amount of revenues.
We have not gone through that process yet. We would have to look at ways to handle the plan with $200 million less in revenue over the five years.
Have you had any preliminary discussions with PICA with regards to this bill?
Yes, I've had a couple of conversations with PICA, and their conclusion is that we could not afford the cuts in this bill and that it would require us to change the plan as it has been submitted to them. 139 5/15/02 WHOLE - BILL 020309
Yes. Mr. Dubow, in Councilman Cohen's testimony this morning, he stated that the Controller said that the cost would be $110 million over 5 years. How do you come to $200 million?
I'm going to turn to Commissioner Kammerdeiner to go through how we came up with our calculation. I had a very short conversation with someone from the Controller's Office, and I haven't seen their calculation, but from what I understand, they only included the impact on the resident side of the tax, so that would make up for some of the difference; I don't know what makes up for the rest.
Good afternoon. I'm Nancy Kammerdeiner, Revenue Commissioner. We've taken a look at the State report on the personal income tax that includes 140 5/15/02 WHOLE - BILL 020309 information about the tax forgiveness program for every county, Philadelphia included, and I will say that we did our initial analysis on information from the 1997 personal income tax filings. After we did that initial analysis, we received the most recent report from the State -- that is for 1999. And I will just point out one thing. You know, we haven't recalculated everything using the new report, but in 1997, there were 94,000 Philadelphia County residents who participated in the tax forgiveness program. In 1999, there were 139,000 participants in the tax forgiveness program. So that means that we did not take into account, when we did our initial analysis, a significant number of Philadelphians who now participate in that program. And as earlier testimony has indicated, the State keeps expanding the levels at which someone becomes eligible for the program, and that would continue to increase the number of Philadelphians who would be eligible for the State's tax forgiveness program and, therefore, would be eligible for the wage-tax reduction as well. 141 5/15/02 WHOLE - BILL 020309 And so, from that perspective, the numbers that we use would, in fact, be low in comparison to what the actuals would work out to be. We did a number of things to look at the data that was there, and I think one thing that may be left out from the estimates that have been done by the Controller's Office is the effect of numerous dependents on the eligibility, because as you probably know, the personal income tax special forgiveness program has higher and higher wage limits, depending upon the number of dependents that an individual may have. And once you take that into account, you start to add some additional participants who might be eligible for the program, and that may be the difference. We will need to sit down with the Controller's Office and see how they calculated their numbers, how it compares with what we did in our calculations, and see whether we can identify anything more specific than those general overviews.
Are there any other questions or comments from members of the 142 5/15/02 WHOLE - BILL 020309 committee? Any other questions from members of the committee? (No further questions.)
The committee is going to take a 10-minute recess. (Break taken.) (Proceedings resume.) - - -
The committee is back in session. This conclude the public hearing we will now go into our public meeting. One moment, please.
I just wanted to announce that in connection with hearing on the last bill, the one on the wage-tax cut for poverty-level people, I circulated a technical amendment suggested by the Law Department of the City to make clear that the year we talk about is a calendar year and not a fiscal year, and there are several other very minor changes in the bill, all of a technical nature, none relating to substance, 143 5/15/02 WHOLE - BILL 020309 that the Law Department suggested. And we've incorporated all of the their suggestions in the amendment, and it was circulated to everyone present here today. (Duly seconded.)
No, that was distributed and we all have it. This concludes our public hearing. - - - 144 5/15/02 WHILE - PUBLIC MEETING
We will now go into our public meeting, and the Chair now recognizes Councilman DiCicco regarding Bill No. 5 020227.
Thank you, Madam President. I move that Bill No. 020227 be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended. (Duly seconded.)
It has been moved and properly seconded that Bill No. 020227 be reported out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit consideration at our next session of Council. All in favor will signify by saying aye. Those opposed? The ayes have it and the motion carries.
The record 145 5/15/02 WHILE - PUBLIC MEETING will reflect that Councilman Goode voted nay. Everyone else voted aye. The Chair at this time recognizes Councilman Clarke regarding Bill No. 020231.
Thank you, Madam President. Madam President, I move that Bill No. 8 020231 be reported out of committee with a favorable recommendation and a request for a suspension of the rules as to allow for first reading at our next available Council session. (Duly seconded.)
It has been properly moved and seconded that Bill No. 020231 be reported out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at the next session of Council. All those in favor will signify by saying aye. Those opposed?
The ayes have it, the motion carries, and the record will reflect that Councilman Goode voted in the negative. 146 5/15/02 WHILE - PUBLIC MEETING Thank you. The Chair recognizes Councilman Cohen regarding Bill No. 020309.
Madam President, I move that Bill No. 020309 be reported out with a favorable recommendation.
I believe you have to move your amendments first.
I first move the amendment to Bill 020309. The bill has been circulated to all the members present at the hearing. (Duly seconded.)
Madam President, I would like to make a motion to table Bill 020309 until we have the recommendations of the Tax Commission. I was a cosponsor of this bill and, you know what, at the beginning, I think it all sounds and feels like a good bill, but --
As the Councilman knows, under the Law and Government Committee, 147 5/15/02 WHILE - PUBLIC MEETING which comes up next --
A point of order, Councilman Mariano. The Chair recognizes Councilman Cohen.
The point of order is not open to discuss. Also, it's not appropriate. This is a motion to amend a bill; the bill is not even before us yet. I just moved to amend the bill. (Duly seconded.)
Okay, I withdraw my table [sic]. I'll save it for the bill. This isn't the bill, correct? All right, I'm sorry.
It has been moved and seconded that the amendment be adopted. All those in favor will signify by saying aye. Those opposed? The ayes have it and the amendment has 148 5/15/02 WHILE - PUBLIC MEETING been adopted. The Chair recognizes Councilman Cohen.
Madam President, I move that Bill 020309 be reported out, as amended, with a favorable recommendation and with a request for the rules to be suspended to permit first reading at the next meeting of City Council. (Duly seconded.)
Madam President, I make a recommendation that we table Bill 020309 until we have the recommendation of the Tax Commission that's going to be worked on in the next hearing, which is right after this, of the Law and Government Committee. (Duly seconded.)
It has been moved and seconded that Bill No. 020309 be tabled. All those in favor will signify by saying aye. Those opposed?
Roll call, Madam President. 149 5/15/02 WHILE - PUBLIC MEETING
No. 7 The ayes are 6, the nos are 7. The motion fails, I believe.
Councilman Kenney is voting no. 14 It has been moved and seconded that --
Okay, it has been moved and seconded that the bill be reported 152 5/15/02 WHILE - PUBLIC MEETING out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All those in favor will signify by saying aye. Those opposed?
The record will reflect that Councilman Clarke voted no. 12
Did you count the 154 5/15/02 WHILE - PUBLIC MEETING vote?
This 6 concludes the public meeting of the Committee of 7 the Whole. 8 Thank you all very much. 9 (Proceedings end at 1:36 p.m.) 10 - - - 11 155 CERTIFICATE I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia's meeting of the Committee of the Whole of Wednesday, May 15, 2002, are contained fully and accurately in the stenographic notes taken by me, and that this is a true and correct transcript of same. RE: Bill No.'s 020227, 020231, 020309 _______________________________, Josephine Cardillo Registered Professional Reporter and Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)