Sunday, July 5, 2015

It's good to question the conventional wisdom on business taxes

Next week, Philadelphia City Council will consider a radical overhaul of the city's business tax policy, being pushed by Councilman Bill Green and Councilwoman Maria Quiñones-Sanchez.

It's good to question the conventional wisdom on business taxes

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Next week, Philadelphia City Council will consider a radical overhaul of the city's business tax policy, being pushed by Councilman Bill Green and Councilwoman Maria Quiñones-Sanchez.

City Controller Alan Butkovitz isn't waiting for the hearing to weigh in on the debate. Today, he held a press conference blasting the proposal.

Butkovitz has a variety of concerns, but one piece of his criticism jumped out at us as wrongheaded: He believes that one of the biggest problems with the Green/Sanchez proposal is that it goes against a long-time consensus on taxes.

“We've had a consensus ... although there was going to be a general reduction in business taxes, there was going to be a focus on the gross receipts tax,” said Butkovitz. “That decision was made about a decade ago.”

The trouble with this logic is that a consensus is only valuable if the consensus is right. The main reason we like the proposal offered by Green and Sanchez is because it challenges conventional wisdom.

There has indeed been something of a consensus on tax policy in Philadelphia in recent years. But is that a good thing? The city's economy has changed dramatically since the current strategy was established. For example, Center City was in pretty rough shape when the tax reform started. Part of the idea was to attract restaurants and hotels. Now that our downtown is thriving, isn't it worth reexamining the overall strategy and wondering if we should be attracting other types of businesses?

Butkovitz said at the press conference that this type of shift is a problem because it sends a mixed message to both business owners and lawmakers in Harrisburg. We see some logic in that argument, but aren't totally convinced. Consensus, no matter how universal, shouldn't be immune to questioning.

We're not quite ready to endorse the Green/Sanchez proposal outright. We still have concerns, many of which were articulated by Butkovtiz at his press conference. But we reject the idea that something should be tossed aside just because it challenges conventional wisdom. Either an idea has merit, or it doesn't.

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Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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