We’re still some 18 months from electing a new mayor and city council, but silly season is already upon us. Trust me, the jockeying and the finger-to-the-wind calculations have already begun.
In recent weeks, we’ve seen numerous would-be candidates try and stake out their turf on signature issues. We saw it in Councilman Derek Green’s misguided push for a public bank, as well as Councilman Allan Domb’s proposal to pass term limits—despite not talking to Council President Darrell Clarke or some of his colleagues about it first. The race is on to grab a headline, any headline, rather than actually get something done. When elections loom, messaging seems to beat policy every time.
The latest example of this desultory trend came this week, when Council’s progressive triumvirate, Kendra Brooks, Helen Gym and Jamie Gauthier, were joined by Senator Elizabeth Warren to propose a wealth tax for Philadelphia. Brooks’ proposal would tax the value of direct holdings in stocks and bonds at a maximum rate of 0.4 percent. The top 5 percent of families with incomes of $364,000 or above would account for nearly three-quarters of the projected $200 million in revenues.
If Brooks, Gym and Gauthier were serious about lifting up working-class folks, they’d move beyond the politics of class resentment and instead put together a problem-solving coalition to invest in building a middle class.
According to Brooks, the money generated from the tax would go to mobile crisis response units, libraries, homeless services and recreation centers. We’ll get to whether those expenditures sufficiently combat inequality—which one would think would be the point of such a levy— but for now, let’s focus on the wisdom, or lack thereof, of pushing another tax in the nation’s most taxed city this side of Bridgeport, Connecticut.
It’s unclear what problem Brooks thinks she’s solving, but the messaging of the proposal provided plenty of opportunity to divide the city into “us” and “them.” “It’s time that the ultra-rich and 1 percent pay what they owe Philadelphia,” Brooks said during the press conference.
Playing on populist resentment of the rich is smart politics—as Warren and Senator Bernie Sanders have proven. But the facts on the ground in Philly don’t really line up, as we’ve covered before. Philly doesn’t have the wealth Brooks and Gym and Gauthier think it has. In a town with 400,000 of our fellow citizens in poverty, and a dearth of corporate headquarters—our two biggest employers are the city itself and the University of Pennsylvania, neither of which pay taxes—where’s all this wealth you’re going to tax? The website taxtherichphl.org actually names names, but—lo and behold—most of them live outside of Philadelphia: Jeffrey Lurie, David Paul and Michael Rubin, for example.
Before we get to the fact that Brooks’ proposal would actually harm the middle class she thinks she’s helping, let’s concede this: If the goal is to shrink the gulf between Philly’s haves and have-nots, you get no argument from me as to that destination. A devastating report, The National Equity Atlas was released just before the pandemic and the murder of George Floyd by PolicyLink and the Equity Research Institute, and it showed just how mired cities are in systemic, and growing, inequality.
“The Atlas’s architects say the data all point to the same conclusion: Growth alone won’t eliminate racial disparities. No city anywhere in the country, no matter how prosperous, stands out for achieving both rapid growth and effective racial inclusion,” wrote The Atlantic’s Ron Brownstein at the time.
So the stakes are high. But does doubling down on our city’s original fiscal sin—taxing that which can up and move, as we do with one of the highest wage taxes in the land—make sense? It’s entirely consistent, after all, to support President Biden’s proposed tax on billionaires and to see the Brooks proposal as foolhardy, because it’s a helluva lot easier and more commonplace to move your residence and/or your business to Bala Cynwyd from Philly than it is to run off to Canada.
“There are many very honorable people with laudable intentions who want to bring more spending to certain areas of the city—especially to the disadvantaged—and they look to taxes for that reason,” said Richard Vague, the state’s Secretary of Banking and Securities and maybe the most informed citizen in Philadelphia on the subject of taxes and inclusive growth, when I asked him about Brooks’ proposal yesterday. “But this happens to be a proposal that would backfire, perhaps more than any other that could be proposed. It would bring a wholesale departure of individuals from within the city—not just a threat of departure but an actual exodus over a very short number of years—and decimate the city’s tax base.”
That’s a Doomsday scenario, particularly at a time when, we just learned, there already is a significant exodus from the city underway. Don’t believe me or Vague? I’m too, I don’t know, whiny, and he’s too plutocratic? How about hearing from Jabari Jones, the change agent president of the West Philadelphia Corridor Collaborative?
In a statement released yesterday, he called the proposal from Brooks, Gym and Gauthier “another example of well-intentioned policy that in practice would be disastrous for Philadelphia…In practice, the tax would prompt wealthy individuals to change their permanent addresses to addresses outside of the City, avoiding the Wealth Tax and skirting the current taxes they pay that fund essential City services. It will cause banks and financial institutions to reconsider their presence in the City (as it did in 1997 when Philadelphia repealed the tax), which will disproportionately affect Black and Brown families in neighborhoods that already have limited access to financial services.”
What both Vague and Jones know is that almost every time a wealth tax has been tried, it has failed. In Europe, countries, including France, have moved away from trying to tax wealth, because it’s hard to measure and virtually impossible to administer. The ultra-wealthy will either pay their accountants to find ways around the tax or they’ll up and move. So do you have confidence that this city government will be able to administer such a tax?
Keep in mind, the IRS doesn’t track unrealized gains from stocks and bonds. Remember Rob Dubow, the city Finance Director who misplaced millions of taxpayer dollars and didn’t even reconcile the city’s bank accounts for seven years? Are you okay with that guy going on a wild auditing spree of average Philadelphians, trying to suss out who owes what? (I reached out to Brooks yesterday to find out just how the tax would be administered, but have not heard back.)
And, critically: Do we even need the money? Interestingly, Mayor Kenney released his new budget proposal yesterday: A whopping $5.6 billion. Let’s put that in context. Six years ago, Kenney inherited from Mayor Michael Nutter a budget of $3.8 billion. That’s nearly a 50 percent increase in spending. Have you seen a return on that investment? Maybe we don’t have a revenue problem; maybe we have a smart spending problem.
After all, are you convinced that hiking taxes on those who can easily up and move and then using that money to invest in libraries, homeless services and rec centers—worthy causes, all—will do anything to alleviate the gaps that exist between our city’s haves and have-nots? Forget, for a moment, about the wisdom behind enacting a wealth tax. Consider this: The proponents of it didn’t even get right what those funds would be used for.
Again, there are tried and true strategies cities are using to focus on our mushrooming income and wealth gaps. Call me a sentimentalist, but I still pine for the days when Democrats and reasonable Republicans alike pushed for policies that build a middle class—good schools, jobs with benefits, access to mortgages; home ownership is still the best way to a life of wealth and comfort. Sometimes we need new and innovative policies to get to those goals—like in Boston, which is fast boosting the standard of living for low-income workers by launching worker-owned cooperatives. But to pretend that “tax the rich” shibboleths—or other campaign-inspired sloganeering—are actually examples of problem-solving policy is disingenuous from the start.
What both Vague and Jones know is that almost every time a wealth tax has been tried, it has failed. The ultra-wealthy will either pay their accountants to find ways around the tax or they’ll up and move.
Look at it this way. How cool would it have been if Brooks, Gym and Gauthier took advantage of the giant hole Jim Kenney’s disappearing leadership has left and brought together a cross-section of city leaders—folks from the business, political, nonprofit, civic and activist sectors—and put together a comprehensive strategy, with buy-in from all stakeholders. Now that would be leadership.
It’s what Charlotte Mayor Vi Lyles did when, in the aftermath of George Floyd, she put together “The Mayor’s Racial Equity Initiative,” a $250 million public/private partnership to advance racial equity, complete with goals and timetables. Admittedly, it’s gotten off to a rocky start, after it came to light that the woman hired to run the initiative faced serious charges of mismanagement at her last gig and was forced to resign. Regardless of how Lyles implemented her plan, though, the fact remains: It is a plan. Do we have a plan, other than to tax?
If Brooks, Gym and Gauthier were serious about lifting up working-class folks, they’d move beyond the politics of class resentment and instead put together a problem-solving coalition to invest in building a middle class. There was a time when that was the calling card of Democrats, in this city and across the nation.
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Header photo of (L-R) Kendra Brooks, Helen Gym and Jamie Gauthier by Jared Piper / Philadelphia City Council