Tuesday, November 27, 2001

Controller's tax plan gets chilly review

Saidel says high rates driving business out

By MARK McDONALD
mcdonam@phillynews.com

City Controller Jonathan Saidel's ambitious tax reform plan got a frosty reception from Mayor Street after its unveiling yesterday.

"It would be hard to endorse the proposal at this time," Street said of Saidel's plan to convert the city's real estate tax into a land-value tax.

As for reducing the wage tax to below 4 percent by 2007, Street said, "I'm not convinced we can do it in a responsible way."

The mayor did say he'd have his staff look at the detailed report, but in recent weeks those same officials have said that city government can't afford what they estimate would be the loss of $900 million in tax revenue over five years under Saidel's proposals.

Of course, Saidel's staff says it has identified $843 million in so-called "supply side effect," budget surplus and cuts to more than pay for Saidel's plan, a number which Street budget director Rob Dubow calls "pure speculation."

But Saidel, in a speech to an impressive assemblage of City Council members and business and civic leaders, attacked those who argue that the city can't afford tax cuts in a time of recession.

"To those who want to say 'No.' Give me an alternative. For those people who want to be naysayers, show me some leadership," Saidel said. "If you say no to all my charts and assumptions and all the demographics and work that we've done, give me an alternative because the alternative can't be that we stand still."

For the record, Street's current five-year plan calls for a wage tax reduction from a current rate of 4.5385 percent to 4.5 percent, which if enacted by Council next March would mean the tax has dropped by almost 9.3 percent since 1996. Saidel argues that's not enough.

But all bets on the city's economy could be off. With the national economy officially in recession, major new city expenditures for the public schools more likely and continuing problems at PGW, the city will be hard-pressed to forego a dime in tax revenue.

Still, Saidel said that bad economic times are precisely the moment for tax restructuring because that's when taxes can drive people and businesses out of the city.

He said he hopes for a "fair hearing" in City Council. Majority Leader Jannie Blackwell pledged that hearings on Saidel's ambitious plan will be held, although when is unclear.

Paul Tirjan, director at Burrill & Co., a venture capital firm, described the urgency of tax reduction and reform, issues that were hotly debated by Street and Republican Sam Katz in the 1999 mayoral race.

When a nascent biotech firm reaches "a handful of employees" in size, Tirjan said, his company has "a fiduciary responsibility to encourage those companies to leave the city."

The reason? Punishingly high taxes that divert money which could be used to enhance productivity and job creation, he said.

On his land-value tax proposal, Saidel said 78 percent of the city's homeowners would see their taxes go down as a result of the change.

And while a parking lot owner might see his real estate taxes rise because his land could be assessed at a much higher rate based on its "highest and best use," the owner would also see his business taxes drop as well as the wage taxes for his employees, Saidel said. *

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