While nationally, taxes have taken a backseat to tariffs, that is hardly the case in the region. Gov. Murphy has proposed raising taxes, while in Pennsylvania, the gubernatorial candidates are staking out their “no new taxes” positions. Taxes will likely dominate the election-cycle discussion, so what should we do about them?
As any businessperson will tell you, you must spend money to make money.
Clearly, both New Jersey and Pennsylvania spend lots of money. Yet, most politicians in both states say there is no money to spend on growth-generating projects such as infrastructure or education.
If that is the case, doesn’t it make sense to ask why we aren’t raising taxes? The region’s economies are lagging and we need new funds to invest in those critical projects that accelerate growth.
It’s interesting that, from the most surprising of places — the business community — a message of reason and forward thinking about taxes is being spread.
Jerry Sweeney, the CEO of Brandywine Realty Trust, is pushing an idea for Philadelphia. He is suggesting that commercial real estate be taxed more. And his proposal is incredibly sound.
In speeches around the region, he has pushed amending the state’s constitution so commercial real estate can be taxed at a higher rate than residential property. The additional tax revenues generated from the higher commercial tax rate would be used to improve the Philadelphia business climate by reducing other business taxes and the job-killing wage tax.
Given that Brandywine Realty Trust is in the commercial real estate business, that is a pretty gutsy thing to advocate.
But he is not crazy — except like a fox. He recognizes that the key to regional growth is improving job gains in the city of Philadelphia. It is the major job generator, but it, too, is lagging. Despite the recent upsurge in employment, payroll growth is about half as fast as the average of the 25 other major cities. And for his business, jobs are critical.
To me, the most important aspect of the Sweeney proposal is that he, as a beneficiary of the faster job growth, is willing to spend the money to help create the faster job growth. Too often, politicians, business leaders, and individuals want others to pay the price for new policies.
Thus, we hear that we shouldn’t raise taxes but that we should cut spending. Except that the spending cuts are supposed to come out of someone else’s program. That’s usually a nonstarter.
It should also be made clear that he is not advocating increasing total revenue, though I suspect that if some of the additional funds were used for things such as education, job training, or infrastructure, he would not be upset. These are programs that attract businesses and accelerate job growth.
Unfortunately, passing the constitutional amendment could be the easiest part of the process. Getting City Council to use the new tax capacity to make Philadelphia’s business environment more competitive may be more difficult. City government doesn’t have a great record of spending money in ways that foster faster economic growth.
But we cannot keep doing the same thing and expect different outcomes. Sometimes, you have to spend more to accelerate growth. If that means raising taxes in general or from certain segments of the community, then you have to do it.
Thus, in New Jersey, where the business community is likely to oppose the tax increases, the critical need to invest in the state’s transportation infrastructure to position the state’s economy to meet the future has to trump the reality that some may pay more to make that happen.
In Pennsylvania, where the “no tax increase” mantra is repeated time and again, the question needs to be asked about how that has worked for the last decade. It hasn’t. Maybe more money should be raised and invested in the state’s key sectors, such as transportation, energy, and education, so they can become greater job creators.
And in Philadelphia, the parochial goals of city government must be pushed aside so the revenue increases coming from higher commercial real estate taxes are spent on making the city more competitive.
If you want something, then put something on the table to get it, and Brandywine Realty Trust’s CEO Sweeney has said he is willing to do that. You have to give him credit for being one of the few people to step up to the plate.
We need other business and political leaders to show the same leadership. If they do that, we just might get the faster growth we so sorely need.