THERE ARE SOUND arguments against each of the three new tax hikes that Mayor Nutter is proposing and that City Council may be acting on as soon as today to provide the school district with $100 million toward its $629 million deficit.
Take the 10 percent hike in property taxes (please!). This stinks not just because it comes on top of a two-year "temporary" 9.9 percent boost in property taxes enacted last year. It's especially bad because the city's system of property assessments is still in shambles; our property taxes already are based on faulty data, and no fix is due for at least a year.
Despite its potential health benefits, a 2 cents-per-ounce tax on sugared drinks still stinks, because it's based on the same faulty premise as the original proposal a year ago. Because the city can't impose a directed sales tax without approval from Harrisburg, this would be an excise tax on retailers who sell sugary drinks. Retailers will have to calculate how many drinks they sell, how many of those are sugared and report that amount to the city. That could be an accounting headache for smaller retailers; by the time they have to pass this tax onto consumers, retailers could decide it's easier to spread the hike across all products, not just sugared soda. And vending machines that don't have tiered pricing for water, soda and nonsugary soda will have to be replaced or the price of all drinks will have to be raised.
Finally, a hike on metered parking, while it could be relatively harmless, comes three weeks after Council approved a bill to . . . reduce the parking tax. In 2008, the city's parking tax went from 15 percent to 20 percent; Council wants to cut it.
The 2008 parking tax hike was imposed on garages and lots, but the new proposal underscores the schizophrenic nature of the way the city approaches taxation.
In fact, the entire effort to help the school district illustrates a city whose tax policy is best described as "ooh, there's a fire - where can we get some water to put it out?"
(See chart on Page 15 for the full tax picture.)
The district fire has been building for months now, with dire intimations about a looming deficit, in part because of state budget cuts and in part because of the expiration of federal stimulus money. On May 24, after a hearing in Council on the district budget, Nutter announced his commitment to giving the schools $75 million to $110 million; that number has been rounded to $100 million.
How did the mayor come up with that number? What is the source of that money? What control, if any, would the city have over it? How will the city get around the state law that says whatever increases in funding it gives the district must go on forever? Those are questions related to just this particular fire.
There are larger concerns - about how the city and the mayor determine a reasonable and rational tax policy - that includes public input. The current fire-hose approach to the district's woes is likely to include lots of public input, but we doubt any of it will be pretty.
Nutter and Council may be banking on the fact that there won't be much time for public outcry, - or for the kind of concerted effort that managed to kill the sugary-drink tax last time around - since both the city and school budget have looming deadlines. But they should also realize that the short time frame also robs them of time to build public support for whatever tax hikes they may want to propose - or even public support for helping the schools. That's the danger of tax-policy-by-fire: You could end up getting burned. *