The two candidates for mayor held a joint news conference the other day to slap down Mayor Street for proposing an end to the (slow, torturous) decline in the business gross receipts tax.
Democrat Michael Nutter and Republican Al Taubenberger said that no way, no how would they allow the pace of tax reductions slow down.
What made the story newsworthy is that the Democratic and Republican rivals shared a podium and a point of view, but it's not really surprising. Do you expect candidates for public office to call a news conference to support tax increases?
Besides, nobody -- and I do mean nobody -- loses points for taking a whack at the (terminally unpopular) John Street. The guy can't even buy an iPhone without getting bad press.
But, this little mid-summer mini-event does highlight what will turn out to be the defining dilemma of the city and its next mayor over the next five years. It hinges on this question: How do you balance the demand for lower taxes (in the name of making the city more competitive when it comes to jobs and business climate) and the demand for city services?
The short answer is: it is impossible. You cannot reduce taxes -- and thus reduce revenue -- without affecting city services. As the Street people like to point out, since 2000 the city has foregone about $1.2 billion in tax revenue by committing to a program of gradual reduction in the wage tax and business taxes.
The tension between the two mandates has buffeted the current administration. Remember when the mayor tried to call a halt to the reductions -- and Nutter fought him off ? This latest Street move on the gross receipts tax is another example.
To oversimplify, Street is service oriented (or, if you prefer, spending oriented). Nutter and Taubenberger are tax-cut oriented.
That said, it is one thing to stand outside City Hall and decry a plan to stop tax cuts. It's another to sit inside City Hall and have to come up with a budget that balances and also meets the basic needs of citizens.
When it comes to the city budget, the story of the last eight years has been this: it has increased at a rate higher than inflation, but most of the new money has gone to three areas: city employee benefit costs, increased debt costs (for NTI and stadium bonds, etc.) and criminal justice -- the cops and the prisons especially. The rest of government, with a few exceptions, has gone on a South Beach diet.
To put it another way, every dollar spent on a new program will have to come from an existing program. Not that politicians are good at handling this tension. Take City Council, please. Council recently decided to increase the city's contribution to the public schools by about $15 million a year by increasing the district's share of the $1.1 billion the city gets each year from real estate taxes from 58 percent to 60 percent. This seems laudable until you ask: How are they going to fill the hole they just left in the city budget? Council's answer, in effect, was: We will worry about that tomorrow. I call this Scarlett O'Hara economics.
Let me tell you where I think this is headed, sooner or later: the city cannot continue its course of tax reductions without making major structural changes in the way the city is run. That includes: personnel costs, work rules, debt structure, and perhaps the basic functions of government. (for example: who should pick up your trash? City employees or a private contactor?)
Try to get that accomplished in Philadelphia and you will run into a maelstrom of opposition, especially from the unions, who -- by the way -- have no problem handling the dilemma of tax cuts vs. spending.
John Street's move on the gross receipt tax is the last gasp of this administration. In January, a new mayor will take up the burden of how to balance tax cuts and improve city services. They have promises to keep. But, let's be honest and keep in mind that it won't be easy to do both.
-- Tom Ferrick
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