Well, by reducing the cost of doing business to make this competitive with other counties and other parts of the businesses --
I guess my question is, that my assumption was, we were looking to reform a tax structure to retain the residents we have, and to retain the businesses that we have, and to attract new residents, and to attract new businesses.
Therefore, we are asking businesses and residents to make long-term decisions; is that correct?
So how can we ask businesses and residents, those that are here, those that we want to come here, to make long-term decisions, if we are not willing to make long-term decisions?
I think we should. 327 OPERATING BUDGET & TAX BILLS - 5/10/04 All I am saying is that there are two sides of the ledger. There is one that has to do with taxes, and the other has to do with spending. The long-term decisions have to be made in those directions.
Allow me to change the use of terminology and not use the word "decisions." How can we ask businesses and residents to make long-term commitments, if we are not willing to make long-term commitments?
Well, but then the long-term commitment, I come back, has to be done on the tax and spending side. I am perfectly willing to say -- in fact, I got through the 21st Century committee, beyond the tax group, a specific statement that we should set a goal of reducing the number of people in the Philadelphia prison from about 7,800 now down to 6,500, I would say within the next four years. I would like to see us make a commitment to reduce the number of people in 328 OPERATING BUDGET & TAX BILLS - 5/10/04 the police department from 6,900 down to 6,100, where it was in 1992, by developing a strategy that reduces crime. Now, I am prepared to set that up as a parallel to tax commitments. And if you come out with that, I mean, Administration may not agree with it, but maybe there is some other way of doing this. I am saying, you can't make a long-range tax commitment without some mechanism to discuss how you deal with the spending side of the government.
I understand the point you might be making that says that we should do tax reform, but we should also make sure that we are enacting budgets that allow us to do it in a responsible way. But I am very concerned with the fact that, at the same time, you seem to be watering down your commitment to long-term tax reform; when at the same time the purpose of it, the outcomes I believe that we are trying to achieve, is to ask other people, those businesses and residents that are here and 329 OPERATING BUDGET & TAX BILLS - 5/10/04 those businesses and residents we want to come, to make a long-term commitment. And worst-case scenario, we make a long term commitment to try to keep businesses and residents here, to try to attract new businesses and residents. At some later point we have to change that commitment. Worst-case scenario is, we have already attracted businesses and residents here and kept businesses here by making the right long-term commitment.
Well, I think the core long-term commitment that a government needs to make is that it will be a good government and beneficial for the city, and the services this it provides will be seen to be worth the money that it is paid on it. That's the core commitment. And taxes is one part of that, yes. But the real commitment needs to be that we are going to have a good government that works over a period of time; that is affordable and competitive, but also delivers the services. 330 OPERATING BUDGET & TAX BILLS - 5/10/04 So you can't isolate it, even in the question of a commitment, even from the question of a commitment. And this government has been voting deficit budgets for five years. That's the bottom line here. We have gone from $230 million to $13 million. And if any family's finances were analyzed that I had $135,000 inheritance in 2000, and I am down to $8,000, and I still have a retirement fund, they might question whether or not you've got it together and under control. So I am for the whole Tax Reform Commission agenda. I am for implementing it. However, but then I am also for being disciplined about the spending side. And this Council, by the way -- I mean, the problem is that Council does not have operational authority over departments. I understand that.
Let me end with this. Let me say that in terms of economic 331 OPERATING BUDGET & TAX BILLS - 5/10/04 vision for the city, I believe it does begin with keeping your fiscal house in order. But there has to be an economic vision beyond just the public sector.
And what we are talking about is how we get the private sector businesses and residents to invest.
And this is really about investment and growth. It is not just about government budget priorities.
I agree. And all I am saying is that the very first argument that others on the economic side --
Mr. Schwartz, you are going to have a little more concise with your responses. We have had people waiting since early this morning, and I would really like to go forward. 332 OPERATING BUDGET & TAX BILLS - 5/10/04 Councilman Nutter, are you completed with your questioning?
Thank you. Thank you very much. Are there any other questions or comments of this witness? Thank you all very much. Thank you, Mr. Schwartz. - - - 333 Whole - 5/10/04 - Bill 040313
Please identify yourself for the record. REV. EDWARDS: I am Reverend Bruce Edwards, and I am the President of the Urban Leadership Council.
Please proceed with your testimony. REV. EDWARDS: Yes, ma'am. Good afternoon. Again, it is always a pleasure to come before you.
Reverend, just a moment, please. The noise level is really much too high. Let's give the witnesses respect, please. Thank you. REV. EDWARDS: It's always a pleasure to come before you to add our voice to what we believe to be critical issues facing our City. In that we did submit our testimony, I will try to jump around, and at least make some of the key points that we feel should be made. First of all, we testified several 334 Whole - 5/10/04 - Bill 040313 times on this issue, one being February the 24th, 2004. And in that testimony we talked about the number of organizations and businesses that had come together in 2002 and began to work on this entire matter of tax reform. This was a diverse constituency and forged a bond that has remained strong and committed to achieving in a very real way tax reform for our City. I am one who always has a problem when history is ignored, and when those persons who sacrificed time and energy and resources are not given credit and respect for the roles that they have played. Let us also be reminded that the Mayor signed the Wage Tax legislation, after we won that victory, with great fanfare, and then took credit for lowering taxes that next election cycle. On May 15, 2002, the ULC submitted and provided oral testimony at hearings called by this body in reference to the establishment of the Tax Reform Commission. 335 Whole - 5/10/04 - Bill 040313 Although at that time we had some reservations about the Commission, and we stated our reservations, we didn't want to see a commission established that just would be a commission whose work was done and then was put on a shelf. Well, thank God, that did not happen. The Commission was a good one. It was a responsive one. It produced three documents that made a whole lot of sense to a whole lot of people. It then became 13 Bills that you are considering now. I had an occasion to speak to some citizens in your caucus room earlier in the day while we waited to get an opportunity to speak to you. And they said to me, would I do something for them in my testimony today. First of all, would I tell you the truth? And I told them, I always try do that. But they wanted you to know that 336 Whole - 5/10/04 - Bill 040313 they as the citizens were fully aware of what this whole thing of tax reform was all about. It wasn't too big for them. It wasn't too complicated for them. They pay the taxes. They're fully aware of the Business Privilege Taxes, in the way that impacts their City. They are aware of the Gross Receipts Taxes and what that does to our City. They're aware of the Wage Taxes that are far too high. We are, in fact, besides New York, the highest taxed city in the country. The time has come to do something about it. We can study it some more, quibble about it some more, play politics with it some more. I asked you the last time I was here, don't play politics with it. I even suggested to you that if you did, consequences would come to bear. Now, sometimes people look at me as if I'm crazy. I might be. But I think I'm just a passionate citizen who has some understanding of what leadership is all 337 Whole - 5/10/04 - Bill 040313 about. And what we're really talking about here is leadership, leadership from the Mayor and leadership from this legislative body. I understand one minute the Mayor's for a land value tax; the next minute he isn't for a land value tax. I don't know what the Mayor's for. He's going to close some recreation centers over here, and then he changed his mind and he's going to close them over there. I mean, let's get real. You have a budget to pass. That budget has to deal with the 13 bills that represent the work of the Tax Reform Commission and the will of the citizens of Philadelphia. That's what the citizens are asking for. They support tax reform in its entirety. They don't want it picked apart. I'm incensed.
I can't even believe that there are some people who were on the Tax Reform Commission who now come before you 338 Whole - 5/10/04 - Bill 040313 and almost tear the thing apart. That's sabotage. That's the kind of thing that we say we weren't going to do. We weren't going to play politics with this. And that's the worst kind of politics I've seen in a long time. ) REV. EDWARDS: The land value tax is very important to us. Land value tax isn't that hard to understand. It's being used all over the world. You tax not what's on the land. You tax the land. It will give an impetus for us to get some real economic juice flowing in this City. The slumlords are winning now. They have buildings that sit there and deteriorate and deteriorate and deteriorate, and they're the ones getting the tax benefits for ruining the City. ) REV. EDWARDS: Then why don't we change that formula? And why don't we give the tax breaks to the hard-working people in the community who paint their homes and 339 Whole - 5/10/04 - Bill 040313 need new chimneys, and the other kinds of things to make the City the kind of City that we want. Land value tax would lower their taxes. Give the citizens a break for a change. ) REV. EDWARDS: You guys... Recently you guys gave yourselves a raise. You work hard. We didn't quibble too much about it. We didn't like it, but we didn't quibble too much about it. You got your raise. But what I'm sitting here saying to you, give the citizens of the City a tax break through the Tax Reform package. ) REV. EDWARDS: That's what we're asking for. Not asking; we are demanding it. We're telling you that if you don't do it, we're going to do something about you. ) REV. EDWARDS: That's what we're saying. If you don't do it... We are a city of citizens who are no longer afraid of controversy. We're no longer afraid to 340 Whole - 5/10/04 - Bill 040313 come back here and tell you like it is. VOICE IN THE AUDIENCE: That's right. ) REV. EDWARDS: Because that's how we feel. That's how we feel. We're not new people here. This is our City, born here. 5 million people. We now have half that many. VOICE IN THE AUDIENCE: Yeah. REV. EDWARDS: We ought to be ashamed of some of the things that we've done to let our City get in the condition that it is. Now, you know I get taxed. And I heard the bell. I want to be... you know, follow the rules. But we really should get past playing politics with this tax reform issue. And ya'll ought to have the guts enough to pass it in its entirety. And if the Mayor vetoes it, you ought to have the guts enough to override the damn veto. Thank you very much. ) 341 Whole - 5/10/04 - Bill 040313
Thank you. Are there any questions of the Reverend? (No response.)
Reverend, thank you so much. REV. EDWARDS: Thank you. (Applause.)
Our next witness. MR. McPHERSON: The next witness is a panel. Bill Miller, Brett Mandel, David Thornburgh, Sharmain Matlock-Turner and Bruce Crawley.
Okay. Mr. Miller, please identify yourself for the record and proceed with your testimony.
Good afternoon, Madam President, and good afternoon members of Council. My name is Bill Miller. I'm Chairman of Philadelphia Forward. And along with me this afternoon is 342 Whole - 5/10/04 - Bill 040313 our treasurer, my executive committee -- our treasurer Sharmain Matlock-Turner; the President of the Greater Philadelphia Urban Affairs Council. UNIDENTIFIED VOICE: The Coalition.
And the Coalition. I'm very sorry. And our Secretary, David Thornburgh, Executive Director of the Pennsylvania Economy League, and our Executive Director for Philadelphia Forward, Brett Mandel, who I'm sure many of you have heard from recently... (Laughter.)
Via e-mail. And we have many of our research members with us, in particular... Is it Jodi Bagwell is here. And we have Kevin Gillen whose mother came down from Boston for Mother's Day, and understood that she had this great opportunity of watching our form of tea party. So, she decided to stay over a day with Kevin, and to see that Kevin's here to answer any of our questions 343 Whole - 5/10/04 - Bill 040313 with regard to real estate tax.
Where's Kevin's mother? Maybe we can recognize her?
There she is. Okay. We come before you to support the bills 04009 through 04021 which would implement the recommendations of the Tax Reform Commission. And I imagine I have a lot to say, but I've never stuck to a script. And since time is short, I'll abandon it, by simply saying that we put tireless hours. And this is the essence of what I consider to be a democracy, citizens giving of themselves for something that they believe in the City that we love, and doing it at our own expense. And this is the actual sum total of that endeavor. 344 Whole - 5/10/04 - Bill 040313 And I can simply say to all the members of Philadelphia Forward, as well as our Advisory Committee, of which, quite frankly, AFSCME, Philadelphia Council, was, in fact, a member. And we held countless hearings, and any of them could have attended. So, we were certainly inclusive and not exclusionary. But I want to thank all of them for their work to get to this day. And I thank you for giving us an opportunity to speak to you about this critical issue of tax reform. Moving quickly to the issue, we have brought before you... We have two posters. And they say to you what we think is the essence of our problem. Those posters represent a study done by the Cosemont Institute. And what they in essence talk about is the cost of doing business. They surveyed 315 cities in the United States. They extracted 20 cities, 345 Whole - 5/10/04 - Bill 040313 the top 10 cities which are the most costly to do business and the 10 cities which are the least costly to do business. And regrettably I report to you -- And this is a national publication. Philadelphia has distinguished itself again. We are number one in red the most costly city in the United States to do business, as it relates to taxes, fees, and other areas which I find almost incomprehensible, is how we have spent money. And our business leaders are out promoting -- I think it's called Select Philadelphia around the country -- with advertising dollars to tell people Philadelphia is a good place to do business. Well, we simply think -- And the Administration, I think, gave a million dollars or so, which is a pittance in advertising dollars, but did in fact do that, to Select Philadelphia to convince people that Philadelphia is a good place to 346 Whole - 5/10/04 - Bill 040313 do business. Well, if you invested that money, time, energy and leadership in tax reform, Philadelphia would be a good place to do business. So, quite frankly, as I read that article -- and we present you with that publication -- it simply says to me that, as I think one of the members of the Administration said about PGW to Councilman Goode, dealing with PGW in terms of its finances, we had to do it. It was not an option. And I'm suggesting to you today: Not to do tax reform for this City to move forward is simply not an option.
David Thornburgh, Executive Director, Pennsylvania Economy League. It's my pleasure to be with you again today as well. Also in the interests of time, I'm going to depart from my prepared remarks. But I did want to say just a few things, to support again the notion of why we're here 347 Whole - 5/10/04 - Bill 040313 and what consequences I think passing the Tax Reform Commission's recommendations can mean to this City. Just, again, as a reminder about where we are as a City, Philadelphia has a very unusual and unfortunate place in the realm of tax structure and tax burdens. We have high burdens. And they're very different, in the way they're constructed, from other cities. For a resident of Philadelphia at the median income of $47,000 a year, you pay $2,400 a year more in state and local taxes in Philadelphia than you do in our suburbs. And if you think about what $2,400 buys, in terms of SEPTA, car insurance, community college education, it's just a huge number. And that, I think, in and of itself explains much of the choices that people have made over time. From a business standpoint, Bill 24 pointed out some of the national press that we're now receiving. We've known for some 348 Whole - 5/10/04 - Bill 040313 time -- I can find you studies from the early 1980s that pointed out, depending on the business, that a business located in Philadelphia would pay anywhere from 6 percent to sometimes 120 percent more in 7 Philadelphia than in the median suburb. 8 As long as that continues, I would 9 suggest -- And I think it reflects the 10 conversation here today. As long as that 11 continues, we are going to have a very, 12 very difficult time selling the charms and 13 the assets of this City. 14 Point's been made that no amount of 15 marketing dollars can sell an inferior 16 product. And I think it's to improve that 17 product that this tax reform proposal is 18 all about. 19 And to bring it back to its 20 essence -- This point was made earlier. This is about jobs. This is about a city that has desperately struggled to hold on to and to create new jobs. This is a proposal that, far more than anything that I've seen in any 349 Whole - 5/10/04 - Bill 040313 five-year plan, far more than in any of the hundreds of millions of dollars of targeted investments that we think we've made over time, this is a set of proposals that promises to create jobs, by influencing not one big choice that some developer's going to make or some sports team, but by influencing literally millions of decisions that small businesses and investors and big companies can make over time. And I think, when all is said and done, that's the only and also the best hope for creating jobs in this City. And again, I would refer you back in the Commission's work to simply the magnitude, the promise of jobs that these proposals hold. This is not in the hundreds or the tens, but in the thousands in the even tens of thousands over time. So, again, I'm glad to be here with my colleagues from Philadelphia Forward. This is a new organization, set up by two former members of the commission with the help of Sharmain and myself, to advance 350 Whole - 5/10/04 - Bill 040313 this agenda, and we hope other agendas in the future. Thank you very much.
Madam President, Brett Mandel, Executive Director of Philadelphia Forward. I, too, will go off script because Lord knows, you don't need to hear more from me because you've heard a lot from me in the past few years. In fact, I wish I could say that I knew what exactly would be to sway the members of this elected body because I have come before you before and produced reports. I have worked with the Tax Reform Commission. I have produced lots and lots of things to say that I hope would have been convincing. Frankly, I will stop speaking because the organization Philadelphia Forward was created to create a new voice in the system, and I hope you have seen 351 Whole - 5/10/04 - Bill 040313 that new voice. I brought my own collection of the e-mails that have been printed out. There's about a thousand e-mails in that box. They came from folks all across the City of Philadelphia, from every Zip Code across Philadelphia. And believe me I know that because I logged in every single one of them, and can give you a breakdown of the Zip Code any time you'd like it. You've gotten phone calls, you've gotten post cards, you've gotten letters. These are letters and post cards and faxes and e-mails from real people. Earlier today the chamber was packed with real people. Philadelphia Forward was created so that you will know that there are real people behind these issues who care about these issues, who write these e-mails, who take a few moments of their time to say: This is who I am, this is where I live, this is what I feel, and press a button. Yes, their tax reform is a very, 352 Whole - 5/10/04 - Bill 040313 very serious issue. And I can walk you through the nuances of our plan. Obviously, I'm here to answer any of your questions. But again, if I knew the words to say that was going to convince you, I would have already said them over the last five years. I will continue to provide the voice for these people, and provide the voice for the people who showed up this morning and stayed as long as they could, and answer any of the questions you have today.
Thank you very much. It's a pleasure to be here today. And again, I will certainly have, as a part of my written testimony -- I'm sure you'll have an opportunity to take a look at it. But I really am here as a citizen of Philadelphia, to lend my voice to the support of the Tax Reform Commission, and to lend voice to those who I think are the ones who are really suffering the most in 353 Whole - 5/10/04 - Bill 040313 the economy that doesn't create opportunity. And those are people at the lowest end of the economic stream in our City. Those are the people who cannot leave. These are the people who are here looking for opportunities, looking for jobs, and can't find them because we are not a competitive environment bringing more opportunity in. Quite often we see people having to go hours outside of Philadelphia in order to be able to find jobs because the jobs aren't right here. Yet we look at those same people. We wonder how are they going to be able to take care of their children? How are they going to be able to show up at our schools? How are they going to be able to really play a part in civic life in Philadelphia, if, in order for them to be able to work, they really cannot find opportunities. And yes, these people clearly need expanded City services. But how is that 354 Whole - 5/10/04 - Bill 040313 going to happen if we aren't figuring out a way to expand our tax base, to bring more people in and to bring more businesses in, in order to be able to create the kind of dollars that are needed in this town so that we aren't every year talking about what is it that we have to cut and what is it that we have to cut. I say that tax reform is about creating jobs. And we need to be able to create jobs for those who are most in need. And those are people in our communities who really cannot afford to or cannot find some other place to go to and leave our City. Thank you.
Thank you. A number of Council people want to be recognized. Again, I would like to remind you all about the amount of people that are waiting to testify. So if you could be as brief as possible, I think we'd all appreciate it. At this time the Chair recognizes Councilman Goode. 355 Whole - 5/10/04 - Bill 040313
Thank you, Madam President. Good afternoon. You state in your testimony and even report today that there's a need to pass all this as a package. And I might be inclined to do that, even with my own votes. But within the Tax Reform Commission reports and within some of the tables assembled and support documents, you loop together some of the revenue loss. And I'm particularly interested in, though I might support all the business tax proposals, how you break down that revenue loss, $236 million figure over five years, with regard to Bill Number 10, Bill Number 12, and Bill Number 17.
We talk about the package as a complementary package, as you mentioned, because we do think that it's three-legged stool. You need to dramatically reduce the Wage Tax, incrementally eliminate the 356 Whole - 5/10/04 - Bill 040313 Business Tax, make the real Estate taxes fair. The recommendations work with each other, and they also have a dynamic effect against each other.
And inclined to support the Business Tax proposals. But there are, I believe, separate costs, in terms of Bill Number 10, Bill Number 12 and Bill Number 17. I'm interested in knowing specifically what those costs are.
There are different costs for each of those bills, and then there's an additional different cost when all of those bills are together. Our staff can help you out with some of the different costs; but, for example, if you allow partnerships to deduct payments to partners against the BPT liability but don't cut the wage tax? It actually costs more, because when you're 357 Whole - 5/10/04 - Bill 040313 cutting the Wage Tax, you are reducing the Net Profits Tax that gets cut --
Mr. Mandel, I'm not asking for the philosophy behind how they work together.
I have a pen in hand actually looking for answers, in terms of what the bills cost separately and/or cost together. I just want to know the costs.
Jodi, do you happen to have the numbers with you? (Unidentified woman speaking privately to Mr. Mandel.)
Off the top of my head, the single sales factor, as I recall, is about $10, $13 million. The net --
I don't believe I was dealing with single sales factor. I was dealing with the elimination of the Business Privilege Tax, dealing with the partnership bill, and dealing with the carry forward bill. 358 Whole - 5/10/04 - Bill 040313
The BPT bill has no 3 cost in the first year because we mirror the Administration's --
We have... While she looks... Because we designed it as a package, we also costed it out as a package. The spreadsheets that went behind it, in terms of this bill, would cost this --
Are you trying to tell me you can't break out the costs?
I'm actually stalling -- I'm actually stalling for time while she looks for it.
I'll be happy to sit quietly while she looks for it, too. I can sing very low.
Why don't you 359 Whole - 5/10/04 - Bill 040313 recite one of the tax reform limericks?
While she's looking for that, we'll get that information for you.
The best one that was played out on the air today was: There once was a man from Nantucket who never was taxed on his bucket. Then he came to Philly where he was taxed willy-nilly. And he decided to move home and say... I'll let you fill in the... (Laughter.) (Applause.)
Maybe someone else. I'm sorry. 360 Whole - 5/10/04 - Bill 040313
Madam President, I have a point of information to the Councilman to discuss, regarding Bill 5 12, if I may.
Point of information with regards to Bill 12 while we wait for the information. Can you just tell us why or how the City ended up at a place where small businesses and law firms, the disparity with regards to the taxing of the small businesses and law firms, and why we want this bill to sort of even out the treatment of small businesses? Because on its face it appears to favor law firms.
Well, it favors... sole proprietorships and partnerships. In addition to law firms, of course, it favors the corner grocer who is a sole proprietor. 361 Whole - 5/10/04 - Bill 040313 God, I wish I knew why it was that our tax structure is like this. In my office I have clippings from 1939 when we put in place the Wage Tax. And you can read the arguments: This makes sense; this doesn't make sense. It's hard to imagine a tax structure that would be designed like this to chase away businesses and residents from the City. I wish I had more institutional memory. David, I would defer to you. Any institutional memory of why it is that we have chosen a tax structure like this?
Councilwoman Brown, if I may respond simply, that your question, as it relates to this tax package, is more than appropriate, particularly as it relates to small businesses. What I was -- The reason I was motivated to join the Tax Reform Commission was precisely that. It was a tax structure that was not only insensitive and inflexible, as it related to small business. 362 Whole - 5/10/04 - Bill 040313 I happened to be reading some national publications. And what they did was, they projected into the foreseeable future in this country the greatest growth area in business where it was small businesses. So, by looking in this City -- And we have small businesses. And let's put a face on it. The mom and pop stores, the grocery stores, our small consulting firms, all the other entities that are small business, it seems to me that the thinking in this and previous administrations were to discount those where your greatest areas of growth happened to be. So as a result of that, if nothing else, we fought diligently to eliminate the Business Privilege Tax. If you indulge me just for a second, we have a practice in Philadelphia, and we have a practice where the Administration in fact employed... It was the Business Privilege Tax over your gross receipts. You paid a double payment, the actual 363 Whole - 5/10/04 - Bill 040313 payment for one year, and then a -- the second payment was projected for the second year. What they did not tell these small business people who are all probably umbrellaed [sic] by accounting firms, who just do their tax -- you know, tax reform -- their taxes each year was that there was a potential waiver that one could get, where you didn't necessarily have to pay the second payment. That was sort of obscure. Stu admonishes me that that was not, in fact, an insidious plot. But the end result was, since you didn't know that you had to pay it, these poor people simply paid whatever their accountant told them to pay. Well, the fact of the matter is, the City ended up garnering $90 million in over payments, $90 million that they could invest, that they could get interest from. Now, I happen to have an accountant, and I didn't pay the second payment. I was 364 Whole - 5/10/04 - Bill 040313 still overcharged close to $15,000 on that simple payment. These are small businesses. And the fact that we are insensitive, inflexible to the fact that we only have a growth area, I'm very glad you asked that question because somebody needs to start thinking about small businesses.
Thank you for your testimony. One more follow up. This Bill says over five years, whereas Bill 10 is over ten years. The reasoning behind the different treatment when they both deal with BPT.
As you heard from Gay Bevilaqua, the Chancellor of the Bar Association, of course lawyers and sole proprietors would love to have this phased in immediately. The cost to do it immediately struck us as excessive. We could do it over five years. That seemed not as excessive. But we would certainly try to do this before we 365 Whole - 5/10/04 - Bill 040313 phase out the entire BPT because this is such a necessary component of it.
Okay, then. Thank you for your testimony. Thank you, Madam President.
Thank you. Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam Chair. Good afternoon, everyone. I believe that all four of you were here earlier this morning when I made a statement and a comment; and a question, I believe, was thrown in to the Administration about basically the negative philosophy that we have in this City and have had for a number of years, where you understand the Administration's concern is less revenues, less money to provide City services. 366 Whole - 5/10/04 - Bill 040313 Well, no one looks at the other side of the equation to say, what if we made it a more attractable [sic] City to do business in? Would that create jobs? I happen to think it would. I'm curious, though -- and not to contradict what I was saying this morning -- curious as to how do you come to the number which you come to in your report, 40 something -- 47,000 jobs over a 10- or 15-year period? I'm interested to know how you came about getting that number. Is it by some sort of a formula that you used, based on comparing to other cities? Just explain to us how you got to that number.
Councilman, I won't speak for the firm, but I'll give you some background. The firm E-Consult was retained to provide some insight into that question. We at the Economy League had worked with E-Consult a few years ago on a similar sort of project. 367 Whole - 5/10/04 - Bill 040313 The way the estimate was arrived at is essentially looking in a very, very detailed way at the last 50 years, give or take, of Philadelphia's history, and looking what happened when various changes to the tax structure and tax rates were made, and what effect that had on wages and real estate values in the City. And that information was the same, conceptually the same look that Professor Inman had used to document in his estimate about 210,000 jobs lost to the City of Philadelphia in that time period. So, we simply or E-Consult simply used that as a basis to sort of roll forward into the future. I think that approach has the benefit of kind of the lessens of history. It's also, I think they would say, used sort of the accepted tools of the trade. But it was really... It's really ultimately about how much Philadelphia can compete for growth that's occurring throughout the nation. 368 Whole - 5/10/04 - Bill 040313 Think of it as sort of market share. Are we grabbing more jobs, higher property values or are we losing that to other parts of the country? That's the sort of the top level sense of where that came from. COUNCILMAN DiCICCO: Is there anything in the report that speaks to if we do not do any of the bills that have been recommended, what the continual job loss will be going forward? Can anyone speak to that?
Well, again, I... Again, the easiest way to predict the future is essentially to keep rolling forward the recent past. And I think that's what the analysis shows, is that absent changes, I think as you suggested, sort of a fresh look, a new approach to this kind of policy, that we certainly shouldn't expect anything different than we received over the last few decades. COUNCILMAN DiCICCO: But that's basically -- 369 Whole - 5/10/04 - Bill 040313
That not only makes common sense, but I think that plays out in the analysis. COUNCILMAN DiCICCO: Yeah, I thought so, too. I just wanted that for the record. I just can't imagine for what reason we would see any increase in job creation if we continue to do business as usual. Just don't understand any reason why. And aside from a lot of the great things that the City has to offer, and the cultural institutions, and all those other things which has kept people here -- And we've seen some modest increase in populations, but only in certain sections of the City. My concern is, if we want to continue to see that growth in residential population, which I think we can, the question then becomes: Will there be jobs for those people when they finally move here? And they're not going to move if there isn't a job. 370 Whole - 5/10/04 - Bill 040313 But maybe some of the younger folks think that there's a possibility going forward, but if we don't create the environment to promote people relocating here, to reside here because there's job opportunities, we'll never get to where we all want to be in the future. Thank you. I want to commend all of you for the hard work you've done. And I'm pretty sure I'm there for all, but still I'm not sure on that last one, that land tax. Thank you. Thank you, Madam Chair.
Councilman, I also wanted to add, for those of us who are also concerned about small business development and micro business development, that we also see it's about trying to keep some of the people we have here who are coming here to colleges and universities, to not only make sure that there are jobs here for them, that hopefully what they're learning, they're also going to be creating and growing businesses here and helping to 371 Whole - 5/10/04 - Bill 040313 create opportunities for people already living here. So, it's about trying to create jobs, but also an economic climate so that people will start to develop and grow businesses here, both larger businesses, medium size business. But we're also looking for people in our neighborhoods who are going to be able to grow micro and small businesses there as well, to make sure the climate is there for them. COUNCILMAN DiCICCO: Thank you. Thank you again.
Thank you. Miss Matlock-Turner, is that your role in all of this or GPUAC's role?
I'm just questioning your role. Everyone knows of your reputation, certainly.
And in terms of this whole Philadelphia Forward... 372 Whole - 5/10/04 - Bill 040313
...will GPUAC play a role? Is it another hat you're wearing a part of what you just said to the Councilman?
Yes. Well, certainly we've been doing a lot of work with working families, as you know, the Campaign for Working Families.
Which is a tax effort in trying to draw down federal and state taxes to make sure that low and moderate income people get all of the tax credits that they deserve. I've also been recently appointed by the Governor to a working families task force for the state to, again, look at the high cost of working families, not only here in Philadelphia but across the state. So it's an effort that we've been involved in for the last several years, to really try to make sure that we're looking at every opportunity to make life better 373 Whole - 5/10/04 - Bill 040313 and to really drive down the high cost of being poor in many of our cities, to make sure people get access to as many goods and services and opportunities as can exist.
Thank you. Councilwoman Miller. We'll come back to her.
Are any of you prepared to respond to questions about the proposed budget? Not the tax bills but the budget and some of the budget cuts that have been requested? And I understand if you're not. I mean, that's not your mission here.
We're prepared to talk, Councilman Clarke, with regard to the tax bills that are listed. And we certainly can engage in that dialogue, relative to 374 Whole - 5/10/04 - Bill 040313 their impact. But we were not -- In fact, we were...
Okay. No; I wanted to... And I understand, you know, that's not why you're here. But it will impact the tax bills, in one way impact the budget. One of the questions I wanted to ask you -- And trust me; I understand if you don't answer this one. Do you support the current budget cuts?
Personally, speaking from a -- Philadelphia Forward has not taken a position on the current budget cuts. And I understand that you are 375 Whole - 5/10/04 - Bill 040313 engaged in a budget process which is really a set of assumptions. So I am not hard and fast upon what the outcomes are going to be, because I'm not so sure what the budget cuts are. There are proposed budget cuts that are out there, and so I'm not -- I mean, I don't know what the budget cuts are.
All right. Do you agree with the need that there need to be budget cuts to deal with the existing deficit? And they're -- I know they're moving numbers, but...
And it really depends on whether you're looking at City Controller Saidel's numbers or the Administration's numbers. I heard --
Yeah. I heard some reports from the Administration where numbers are changing even this morning.
You agree that the numbers are large, regardless of who's --
I mean, I think there's a potential deficit. But what I agree more with is that... Two things: I think one, that this government can be more efficient; and, two, I believe that if we don't do something about the environment and climate to bring more business here --
All right. You're not going to answer the question. I'm okay with that.
You're not here for that. Rather than... You know, I'll just go to what you're talking about.
In references in the executive summary, and with respects to recommendation seven also, I get a sense 377 Whole - 5/10/04 - Bill 040313 that a substantial amount of the burden -- and maybe I shouldn't characterize it as burden -- but the revenue that needs to be generated to support some of the recommendations will come from the real estate side. Am I misreading that?
No. Absolutely. There's the suggestion: What happens if we cut taxes? What happens if we make this a more hospitable environment? We grow jobs. More people want to be here. More people want to be here, values rise. If the opposite happens, more people don't want to be here; values fall. We don't want that. We want the other side. We want values to rise.
So the answer is, yes, that a large part of this is contingent upon a substantial increase in revenue from real estate.
There was something passed around today -- I think it came from the Administration -- indicating that the 378 Whole - 5/10/04 - Bill 040313 costs, certain costs of tax proposals would result in that. I mean, we want to be very clear.
If you look at where revenue would come from, in terms of growth in the City, some would come from new jobs. We get taxes from jobs. Some would come from new businesses. We still get taxes from businesses while we phase out the BPT. Some would come from new taxes from increased values on real estate.
All right. Well, can we agree that the increased value in real estate and the changing of the way the real estate assessments will come to fore as a result of the land value tax will be probably the short-term increase in revenue that will help --
-- I mean, I think everybody has to agree that the ability to raise revenue from the jobs is not going to happen tomorrow.
The two shifts that the Tax Reform Commission proposed: One, the change to value of properties at 100 percent, is truly that, just a shift. It would not result in any extra revenue to the Administration, to the City --
The two shifts that the Administration or that the Tax Reform Commission proposes: One, the shift to land value taxation; two, the shift to a hundred percent valuation.
Can you pull your mike a little closer? Because you're talking fast and you're talking low.
We have two shifts 380 Whole - 5/10/04 - Bill 040313 proposed. One would do a hundred percent property valuation which would mean that everybody would be asked to pay a hundred percent of what their property is worth. We would lower the taxes so that the City doesn't bring in any extra money. The other shift would be land value taxation. Some people would be asked to pay more; some people would be asked to pay less. Again, the City wouldn't bring in any additional revenues. So those two shifts --
An individual taxpayer may see taxes go up or down. Another reason why we say these proposals are knitted together because we recognize that some people who maybe have been getting a break on their taxes, if we 381 Whole - 5/10/04 - Bill 040313 go to a hundred percent valuation, might be asked to pay more. Those people would be awfully upset if we weren't dramatically reducing the Business Tax, dramatically reducing the Wage Tax. David.
Councilman, my, I guess, thought on your question is, I wouldn't take it as a foregone conclusion that the property tax would be used to sort of fill that short-term gap. I think -- and again, you can direct this question to them yourselves -- but the E-Consult research on Philadelphia's history suggested that there was a fairly quick response to tax changes coming from the local economy, that in terms of new jobs, and therefore tax revenues. The response was fairly quick. It didn't need to kind of gather steam for 10 or 12 years.
Well, their analysis had taken into account the last 50 years of tax changes, and --
So I'm assuming that you're talking about some time ago because you yourself had indicated in the last several years you have not had any substantive job growth. So utilizing that 50-year period, I'm assuming you're talking about years ago --
Although we have seen revenue growth, Wage Tax revenue growth, even with Wage Tax cuts, since the cuts were first enacted.
As David had suggested earlier, all the E-Consult numbers are in relation to what's happening in national economy. 383 Whole - 5/10/04 - Bill 040313 And one thing that's very instructive, if you've looked at recent five-year plans, they used to include a chart in the five-year plan that showed, as we have reduced our Wage Tax, as we have reduced our Gross Receipts Tax, even though they're small reductions, the gap between national employment and local employment has been narrowed significantly. Now, clearly, if the nation loses 50 million jobs, it's hard for the City of Philadelphia to --
What do you attribute that to? You've said that we lost jobs, but yet there's an increase in revenue associated with the Wage Tax. Is it higher jobs? I mean --
So it's salaries. So it has nothing to do with job growth. 384 Whole - 5/10/04 - Bill 040313
But again, there's also... We didn't lose as many jobs as maybe we would have predicted, had we not made the changes in the Wage Tax and the Gross Receipts Tax.
Well, what is it? I mean, you know, is it... You referenced the fact that we had increased revenues in Wage Tax and tried to imply that it had something to do with the Wage Tax being cut; therefore there were additional jobs created. But then on the other hand, you're saying there were not additional jobs created; there were jobs lost. So, I mean, are you saying here that the incremental Wage Tax, small be it, have encouraged increases in the revenue?
If your job prospects are better, if the job market is better, even if you're losing jobs, if the job market in relative terms is better, then you should have wage inflation. You should have salary growth. 385 Whole - 5/10/04 - Bill 040313 If there is nobody to demand my services in the marketplace, well, there's no pressure on my salary to increase.
But the median income in the City has dropped. Can you agree with that?
Well, that's... Household income and households are... have changed, in terms of composition over time. So, it's not a parallel kind of number, household income and wages. But again, I think we... The value... And I think David Crawford is here from E-Consult. and I don't know if he wants to speak to this, but the value of the E-Consult work is, it looks at the lessons over a long period of time which are going to hold up, I think, better than any sort of two- or three-year period, even though I think the recent experience has been positive, does suggest that there's been a positive benefit to Wage Tax 386 Whole - 5/10/04 - Bill 040313 reductions.
And I'm not disagreeing with that. I agree with you. But you implied... I asked the question about the short-term issue, with respects to revenue reduction on the City's end. That has to come from somewhere.
There's more of a likelihood that that's going to come from the real estate side, if you -- if you -- based on this recommendation, that you have the flexibility to increase revenues on real estate. Right? It's your recommendation. So that increase could potentially offset any reduction in revenue as a result of the cuts, the tax cuts, right, on the business -- on the wage side?
If you're saying that an actual increase in rates, that's 387 Whole - 5/10/04 - Bill 040313 certainly not what's being proposed. The increase in rates is a choice that City Council and the Mayor would have to make itself.
Do you mind? We have a number of Council members.
Thank you. We'll do the next go-around. The Chair recognizes Councilwoman Miller.
Yes, ma'am. Actually, Council President, my light was on by mistake. But I do have a question. 388 Whole - 5/10/04 - Bill 040313
Okay. I heard someone mention that David Crawford is in the room?
I just have a question regarding the property tax increases. And that's a part of one of the tax --
Mr. Crawford, do you mind coming to the witness table, please.
Madam President, we were including Mr. Crawford in our next panel.
I can ask Mr. Miller, no relation to Donna Miller, but a 389 Whole - 5/10/04 - Bill 040313 friend. I guess... Actually, I'm just a little bit uncomfortable. Just need more information about the... I was just sitting here thinking about the projection of the increase in property taxes. And the reason I asked for Mr. Crawford, I know that in 2002 he did a report; just felt that increase in property taxes wasn't feasible. And now it's 2004. And what is the difference? I don't know that they're any more feasible now than they were two years ago. And also, when you take a look at the percentage points that the property taxes will go up versus the percentage points of a wage tax, et cetera, are just for the everyday citizen and not a business, then I don't know how the citizen, everyday citizen, would make out, just in terms of the increase because I think the property tax percentage increase is higher than the Wage Tax. 390 Whole - 5/10/04 - Bill 040313 And could someone explain that to me, if in fact that's not the case?
First of all, I think there might be a misconception. The idea is not to increase the rates of real estate taxes. There's fundamental fairness issues with --