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The Tax Reform Commission was on the money.

by Ed Schwartz

Jonathan Stein has wasted no time in conveying to the public why he was the only member of the Tax Commission to vote against our recommendations and the final report. The other 14 members of the Commission voted yes on our recommendations. Even before the official unveiling of our report, however, he registered his objections in the Philadelphia Daily News, chastising us for missing the "opportunity" to provide a wage tax exemption to the working poor.

Now that our full report is out it is appropriate to answer him, as part of the public debate on our recommendations that has already begun.

First, the primary goal of the Commission members in supporting both wage and business tax reduction was jobs. Just about everyone we heard -- from individual business owners, to organizations representing every sector of the business community, to people working on economic development for the city -- made it clear that our wage and business taxes have made it next to impossible to attract or even keep businesses in Philadelphia without enormous subsidies. Kenneth Goldenberg's request for $5 million in tax breaks to renovate the Sameric theater drives the point home. We simply cannot rebuild our economy through a series of high-profile, highly subsidized projects alone. At some point, we are either attractive to individual businesses -- or we lose them. That's what is happening now.

Our second concern was to maintain fiscal and social responsibility -- meaning that we had to pay attention to how much revenue would be lost from any individual recommendation, especially in the early years of our plan, before a "supply-side" effect might be felt. Otherwise, we would be threatening public safety and the overall quality of life of Philadelphia in general.

That is why we recommended reducing wage and business taxes over a 10-year period from 2004 to 2014. Even these reductions will prove a fiscal challenge, costing the city approximately $50 million a year over the next four years and even more after that if economic growth falls short of our expectations. But a 10-year timetable will enable the city to evaluate the program every year and make adjustments as they seem necessary.

Providing a blanket exemption for the working poor fails both tests.

It offers no incentive for businesses either to locate or even stay in Philadelphia, especially if they employ the kind of high-wage, skilled employees we need to grow our economy.

As proposed in City Council, it would end up costing an additional $143.5 million over the next five years -- as much as $46 million in a single year -- beyond what our own proposed cuts would entail. Given the special importance of public services in low- and moderate-income neighborhoods, it seemed especially irresponsible to place these neighborhoods at risk.

Jonathan is now taking a position that is thoroughly contradictory. He chastises us for proposing tax cuts that may turn out be too expensive but then wants to add another tax cut that will nearly double the price. He is skeptical that reducing taxes will expand our economy, but then argues that low-income wage earners spending money on the retail corridors where they already shop will make a real difference.

The final irony became clear to us as we learned more about the federal and state exemptions created for low-income wage earners. It turns out that most eligible workers still don't take advantage of them. That's why a "Campaign for Working Families" has been put together by the Greater Philadelphia Urban Affairs Coalition. It exists specifically to help the working poor make full use of as much as $150 million, collectively, in federal and state government rebates that are available to them now.

The Tax Commission has recommended that the city invest at least $1 million in this program to insure its success. It seems to us that between helping low-income wage earners take advantage of $150 million in support from the state and federal government versus creating a new rebate that will cost the city as much as $43 million, the choice is clear. Jonathan Stein doesn't agree, but so far his arguments in print have been no more persuasive than they were on the Commission itself.

Ed Schwartz was chairman of the Tax Reform Commission and is president of the Institute for the Study of Civic Values. If you would like to respond to this Slant or have one of your own (850 words), contact Howard Altman, City Paper editor in chief, 123 Chestnut St., third floor, Phila., PA 19106 or e-mail altman@citypaper.net.