“We cannot grow, or even preserve, our revenue base unless we cut taxes. The status quo will lead to less revenue”

In the end, the tax reform movement in Philadelphia died without a whimper.

Last week, when City Council voted to freeze the wage and business tax reductions scheduled for coming years, it was done by unanimous vote and without debate. The Philadelphia Inquirer story on the vote ran on an inside page. I have seen no editorials or letters of protest.

The status quo, it seems, is just fine with Philadelphians.

It’s hard to believe that a movement that took up so much oxygen - and column inches - during most of this decade could expire so quietly.

One reason is that the knife was wielded by one of the movement’s leaders - Mayor Michael Nutter, who as a City Councilman, helped make tax reduction a central issue.

It was Nutter, then running for mayor, who gave us the quote above. It is a succinct statement of the philosophical reason for tax cuts.

In a nutshell, here is the story of taxes in Philadelphia. It has the highest individual taxes of any city in America. It has either the highest or second highest business taxes in the nation, according to other measures.

The rates are so high they present a barrier to people and businesses to locate in the city. In fact, if you were a scout for a business looking to relocate and I was the CEO of that business, I would probably fire you if you recommended we move to Philadelphia.

It just doesn’t make economic sense.

As a result, in order to attract and keep businesses, the city has to offer them bribes, in the form of tax breaks usually, to set up shop or stay here. The inequity of the tax system is compounded by the politics of tax breaks.
So what happens? We continue to lose jobs and people.

In 1970, the city had 920,000 jobs. In 1980, it had 782,000. In 1990, 746,000. In 2000, there were 696,000 jobs in the city. This year, the figure is 660,000. Over the same period, the city has lost 490,000 residents.

There are many reasons why Philadelphia has lost 260,000 jobs and nearly a half-million people since 1970. High taxes are only one factor.

But, it is the factor in direct control of City Hall. The mayor can’t do much about the demise of manufacturing in the U.S., the rise of overseas competitors, the mergers that swept away or diminished so many Philadelphia corporations.

City Hall can do something about our tax rates. And, beginning with Ed Rendell, mayors have tried to enact reductions - usually in baby steps.

In 2003, a Tax Commission created by Council and the Mayor Street, recommended accelerating those reductions, saying that the cost of cutting business taxes would pay for itself by bringing new businesses into the city.
The alternative, the commission said, was economic stagnation and the continued decline in jobs. They were right then and they are right now.

Mayor Nutter has justified the freeze in the reductions by saying that these are unusual times. He’s gotten his lines down, often using the same language rug stores use: an incredible, unprecedented, once-in-a-lifetime sale! I mean, recession.

With tax revenues sagging, the city must cut services, stop the tax cuts and hunker down for the economic storm ahead. The current mayor is a wise politician. He got David L. Cohen, Rendell’s former chief of staff who is now president of the Chamber of Commerce to buy into his plan.

Cohen, an executive at Comcast, is a Big Dog in town and forceful enough to keep the business community quiet. They’ve taken this medicine without a peep.
But that doesn’t change the facts. Old cities such as Philadelphia tend to enter into recessions sooner, feel the effects more deeply, and emerge from the downturn later than the rest of the nation.

In the recessions of the early 1980’s and 1990’s job loss accelerated in the city. We can expect the same to happen today. Our economy these days is service industry oriented and they will take big hits.

And when the recession ends? Philadelphia will emerge with the same onerous, non-competitive tax structure it always had. The gravitational forces that pull people and jobs out of the city will be the same.

And people may look back on this moment - when the tax movement quietly died - when the city decided to give up on its future.