An article in today's Philadelphia Daily News caught my eye. Philadelphia is home to several fine universities, some excellent medical schools and teaching hospitals, fine museums, Constitution Center and the birthplace of two of my favorite people, one in the mid 20th century, the other in the mid 19th century. I visit its suburbs every week, and have a sense of knowing the territory from having grown up in those suburbs.
The article, entitled Philadelphia targets one of its toughest problems, says, in part,
Only 14 percent of city residents hold a bachelor's degree, according to the 2005 study "Graduate! Philadelphia: The Challenge to Complete," by the Philadelphia Workforce Investment Board and the Economy League of Greater Philadelphia.
In Boston, that rate is 25 percent; in Seattle, it's 36 percent.
Philadelphia's college attainment rate puts it at 92nd among the 100 largest cities in the country -- scraping the bottom.
In fact, in Philadelphia -- unlike Boston, Chicago or Washington, D.C. -- there are more people who have started college and dropped out than there are residents who actually hold a four-year bachelor's degree.
What could be behind those statistics?
I can suggest one key factor: Philadelphia has a 4% wage tax. Wage taxes, like many of the other dumb taxes cities and states use for revenue, drive away jobs. Wage taxes drive away people who have alternatives. Wage taxes create sprawl. Wage taxes reduce the spendable income that their victims have left for making their lives better.
Wage taxes are one of the dumbest things a smart group of people can do to itself.
I listen to the traffic reports for Philadelphia, and am repeatedly amazed at where the tie-ups are and where the reporting is focused: King of Prussia, once a sleepy suburb with a major shopping mall at the confluence of I-76, I-476 and US-202 and PA-422, now the tie-up center, as people who work between KofP and Philadelphia and live beyond KofP out toward West Chester and Downingtown and Limerick. But I know why it happened.
The article continues,
"Philadelphia happens to be the only major city we could find that has more people who started college and didn't finish than people who finished," said Sallie A. Glickman, chief executive officer of the Philadelphia Workforce Investment Board.
This gap in college attainment -- the official term for getting a four-year degree -- has long gotten less attention than Philly's other urgent educational shortcomings, including the city's poor high school graduation rate.
Frankly, a low percentage of workers with college degrees wasn't a problem when the city's economy ran on manufacturing, shipbuilding or other jobs where skill was more important than a diploma.
But now, as any job-seeker knows, the economy is "knowledge-based" and top employers want four-year college degrees. At least.
Which means that low educational attainment has become a big problem for people trying to find well-paying jobs -- and, more significantly, for the city's tax base and its economic health.
Ah, the tax base.
The 19th century Philadelphia-born person I referred to is Henry George. He recognized that the legitimate tax base for any municipality is not its wages, not its sales, not its imports, not its buildings, but its land value, and that not a single acre is going to leave town if we place a tax on its annual value. And that tax could be nearly all of its annual value without doing any damage, and without inflicting any injustice, and without discouraging any desirable activity.
When we tax land value we get better land use, particularly if we are both empowered by our laws (as Pennsylvania has been for 90+ years) and smart enough to NOT tax buildings at as high a millage rate (brilliance is not taxing the buildings at all). Landholders are incentivized to put their choice sites to good use, and have less ("smart" scenario) or no ("brilliant" scenario) disincentive from a tax on buildings. They can't afford not to! This means that neighborhoods get redeveloped, from single-family to multi-family; that decrepit rowhouses which teeter and sit vacant simply won't be tolerated by their absentee owners -- they can't afford to keep them, so they sell them to someone who is prepared to do the redevelopment which makes them viable. Which makes for viable neighborhoods. Maybe no longer single family rowhomes; multi-story condominiums might be the logical step. These neighborhoods are already served by city water, sewer, stormwater runoff, transportation systems, schools, emergency services, public health, and all the other things that make city living realistic. Why shouldn't the land be used to house people in comfort and at affordable prices?
Land value taxation is a logical and just and good-incentives revenue source. A wage tax is just the opposite. It burdens city employers, it burdens city employees. It burdens workers. It steals something which the worker created. Many smart people flee, if they have a choice. Others find work that isn't subject to the tax, resorting to the underground economy.
Not one building lot escapes underground. They're all visible, and if the city is smart enough to put its assessments online, where all of us can look at them, any inequities will soon get ironed out (even if it takes the replacement of the members of the representative boards to achieve that).
If the new mayor of Philadelphia, Michael Nutter, is serious about the city's workforce, he'll support LVT:
And it gained a powerful supporter on Jan. 7, just one day before Dionne Graham went looking for help at the College Access Center.
That day, Mayor Nutter took office and gave a passionate inauguration speech about the need to rebuild the city.
"There is nothing more important than growing and developing a skilled and educated workforce," Nutter said. "That is the task, that is the work that will define who we are and what we are about."
Noting Philly's 92nd out of 100 ranking, despite the 93 institutions of higher learning in the region, Nutter called on city and corporate officials, employers, educators and Philadelphians in general to come together to address the problem.
"So, I challenge us to set another goal for this city," Nutter began, "to double, to double our resident four-year bachelor's degree attainment rate over the next five to seven years.
"If Portland and Seattle and Oakland and dozens of other cities can have over a third of their population with bachelors' degrees, then so can Philadelphia," Nutter said.
Connect the dots. It is all related. When a city imposes dumb taxes, jobs leave. But the land value is still there. Use it. It is a far superior tax base. The jobs will come back, and Philadelphia's residents will thrive. (Its current absentee landlords may not, but that's not a big loss for Philadelphia or any community.)
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It appears that what I posted to their comments page might not show up, so I'll paste it in here. I tried to be diplomatic:
What sets Philadelphia apart from other cities with more educated residents is that Philadelphia's tax structure drives many of those who have alternatives -- e.g., suburbs and suburban employment -- out of town.
Get rid of the wage tax, and much of this will correct itself. People with choices will return. Jobs will return. People who have job opportunities will acquire the education and training they need; As the article notes, Philadelphia has the infrastructure in place; but the graduates of its colleges and universities choose to go elsewhere.
How can Philadelphia finance its necessary spending without relying on a wage tax, or a sales tax? Look down. The answer is under your feet. For decades -- centuries! -- your predecessors have invested in highways, ports, railroads, trolleys, water, sewage systems, public schools, hospitals. You spend money on emergency services, public health, public education. All those things create land value. Tourists come to Philadelphia and their steady stream creates land value.
All you need to do is to tap that value. Tax your land value. Reassess it every year or two to account for changes that raise or depress land values in various parts of the city. Tax that land value as heavily as you need to. Not a single lot is going to disappear into the underground economy, or cross City Line during the night, or move to the shore for the summer.
And Philadelphia's landowners -- be they residents or absentees, individuals or corporations, family or philanthropic trusts, university endowments, real estate investment trusts, foreign sovereign equity funds or the Duke of Westminster -- will put their land to better use. Parking lots will give way to useful buildings, suitable to this decade and the next, or an occasional parking garage. Obsolete single family homes will give way to low-rise condominiums. Diners will give way to taller buildings with a coffee shop on the street level, and housing or commercial space on the other floors. The commercial space this creates, coupled with the removal of the economy-depressing wage tax, will revitalize Philadelphia.
And when there are plenty of jobs requiring more education or training than the workforce has, they will seek that education.
Or you can leave Philadelphia in the hands of its landlords and bemoan all the problems that leads to. Lots to bemoan, and the excuse for lots of programs. Expensive programs, butting up against a wall that tax reform would simply dismantle.
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