Nutter Prevails on Sales Tax Hike

Member Group : Nathan Shrader

Over the past several weeks Philadelphia Mayor Michael Nutter resorted to unnecessary scare tactics, the demonization of non-city legislators, hostility towards the business community, and offended his supporters in organized labor. All of it a result of his efforts to secure legislative permission to implement a crushing tax hike on city consumers that will be a bane on businesses large and small, which he received on Sept. 17 when the state Senate passed the measure by a vote of 32-17.

For those just tuning in, Philadelphia is facing a $700 million budget shortfall over the next five years. In order to fill the gap, Mayor Nutter requested legislation from Harrisburg granting Philadelphia the ability to raise the sales tax from seven percent to eight percent citywide while seeking to defer more than $200 million in city pension contributions to help get the city’s fiscal house in order.

The House of Representatives first passed H.B. 1828 in August to permit Nutter’s sales tax increase. However, the state Senate added an amendment freezing pension benefits for current city employees while requiring a less costly approach to pensions and benefits for future workers. The House stripped out the Senate’s pension reform amendment due to opposition from public labor unions. The Senate caved in, giving Nutter his sales tax increase without the fiscally responsible requirement to reform the pension system.

Nutter claimed throughout the summer that drastic cuts would be made without the sales tax increase to augment revenue collections. His office released on Aug. 20 a scaremongering scheme called "Plan C," which would go into effect sometime this October: $43.9 million in Police Department cuts including 972 fewer police officer positions funded in FY 2010, $16.7 million in Fire Department cuts, $14.4 million cut from the Streets Department, $4.7 million cut from the Health Department, $29.6 million cut from the Free Library of Philadelphia, and almost $31 million in cuts to the Recreation Department.

Now that the legislation is passed favoring the sales tax hike and minus the pension reform amendment, we ought to assess the four major problems that plagued both Mayor Nutter’s position on raising the sales tax, his threatened cuts, and the shoddy approach he used to "campaign" for the ability to implement the tax increase which all likely led to the situation being drawn out for as long as it was.

First, the decision to make such deep cuts to core public services like public safety is ludicrous. Would a Mayor with any political sense who faces reelection in two years actually cut almost $44 million from the Police Department and leave the city with 972 fewer cops? This is especially capricious considering that the Philadelphia Daily News reported on July 25, 2009 that the city’s murder rate is down 30 percent from 2007. Philadelphia has also seen major decreases in homicides, shootings, and rapes. Nutter’s plan would have reversed these gains, leaving him with the only option: blame Harrisburg for soaring crime rates when his name next appears on the ballot in 2011.

Second, Nutter’s proposed cuts were largely scare tactics designed to rally Philadelphians to his side and against a state legislature dominated by members from counties other than Philadelphia. He assumed that sending out notices to citizens announcing the suspension of weekly trash pickups and posting "closing soon" signs at public libraries and community centers would help mobilize Philadelphians to take action. However, this was a poor tactic since Philly’s legislative delegation had been largely with Nutter and not against him.

Philadelphians angry about cuts for cops cannot vote to turn out legislators from the hinterlands in the 2010 state House and Senate races. Legislators from places like Monroe, Mercer, and Mifflin Counties don’t sit up at night worried about whether or not Philly voters are happy with them. These cuts would never directly impact their constituencies, thus having no electoral impact whatsoever on their own reelection efforts. Nutter cast his political public relations net too wide and too deep. He should have concentrated on bringing other non-city legislators to his side early on rather than publicly taking the switch to them at every opportunity.

Third, his plan to raise the sales tax lacked and continues to lack common sense in a down economy with soaring unemployment and a bad business environment. The Philadelphia Inquirer reported on Sept. 13, 2009 that local merchants were on edge about the sales tax hike, demonstrating that a consumer purchasing a $3,600 plasma television would save $72 by simply crossing into one of Philly’s numerous surrounding counties. It looks like this concern is now going to be a reality for small businesspeople in the city.

Finally, Nutter allowed the legislature to outmaneuver him by tacking the pension reform plan onto the sales tax increase. As a result, local labor unions rebelled and even booed Nutter at Philadelphia’s Labor Day Parade. His request for the sales tax increase caused political consternation in the business community and then the pension issue caused him tremendous heartburn with his core political constituency. One would think that someone with Nutter’s experience and savvy would have known that in politics you don’t get something for nothing, which is what he was asking the legislature for to begin with.

Churchill said "that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." The same can be said of a city trying to tax itself back into solvency, especially when the Philadelphia Tax Reform Commission says it already has a tax burden more than ten times the average of other municipal governments in Pennsylvania.

The Mayor was clearly worried about his image, his chances for reelection, his legacy, and the future of Philadelphia. This could have been his moment to define himself as a true innovator by saving money rather than spending it, addressing Philadelphia’s status as the most over-taxed city in America, privatizing and contracting out the most expensive city services, permanently reducing the number of political functionaries on the city payroll, and protecting public safety. It could have also been the Senate’s moment to stand up for the citizens and businesses of Philadelphia. Instead, both failed badly.

In the end, the Senate blinked first, Nutter prevailed despite a badly flawed strategy that could have and should still cost him dearly with local voters and with leaders in Harrisburg, and the taxpayers are again left holding the bill. It’s a shame to see it go down like this.

The author is a political strategist based in Philadelphia. He is a graduate of Thiel College and holds an MS in Political Science from Suffolk University. He can be reached at [email protected]Shrader.com and through his web page at www.NathanShrader.com.