The Environmentalist Case for Philly Wage and Business Tax Reform

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Here is a crucial point for Philadelphians who consider themselves environmentalists.

The fact that almost 40% (!) of Philadelphians leave the city limits for work every day, mostly via solo-driving, is an absolute disaster for the climate. The more people who can both live and work near Center City, the lower our region’s carbon footprint is going to be. We need to pull more of the region’s office jobs to Center City. Here’s the key passage from my write-up of this year’s State of Center City report:

The core Center City area has a lower carbon footprint than extended Center City, both have a lower carbon footprint than Philadelphia as a whole, and Philadelphia has a lower carbon footprint than its suburbs. Interestingly, the Philly burbs have a higher carbon footprint than Pennsylvania on average.

It isn’t because Philadelphians are some virtuous granola-munching hippies. When people live in an attached home that takes up a modest amount of land area and occupies most of the lot, and they walk, bike, or take transit two miles or less to their jobs, they end up with a pretty low carbon footprint.

But when we send almost 40% of our people out of the city every day to drive to one of the highest emitting areas of the state, their carbon footprints go way up when they are there. They buy gas, they solo-drive to work, they park on a big surface parking lot, they use energy in a big land-hungry suburban office park building with a less efficient HVAC system than any skyscraper, they drive to an environmentally deadly Big Box shopping center for lunch and back, and then they solo-drive home.

A tax reform package that brought most of the region’s office jobs to Center City would slash the region’s carbon emissions if it meant that more residents could live and work in the city.

The point isn’t to present this as a trade-off between equity and the environment. The people who see an equity trade-off with a tax reform package that shifts the tax burden off of wage and business taxes and onto land are simply mistaken.

Let’s unpack this quickly: the wage tax is flat (because of the PA Constitution’s dumb uniformity clause) so there’s no real change to the progressivity of the tax distribution from a wage tax cut. And then a shift in the tax burden from business taxes onto land taxes would just be a shift from one kind of capital (the productive kind that creates services and products and jobs and houses) onto another kind of capital (the unproductive kind where people sit around collecting rents off the productive stuff those other people do.) A shift onto general property taxes would lose much of the progressive oomph, which is why the tax burden needs to shift onto land value specifically.

This is the sort of wealth tax shift Thomas Piketty is saying we need. If we’re looking at wealth, not just income, this would be a huge progressive win, despite how it would be messaged in some wrong-headed corners of left wing politics. Philly’s tax code should advantage wage earners and actual honest-to-God investors, and disadvantage people who make money merely owning stuff and collecting rents. Shifting the tax burden onto land specifically would mainly hit the fancy people who own the best land in Center City, and cut taxes for most other people. And of course it would be a huge win for pro-growth economic policy.

This entry was posted in Economic Development, Economy, Environment, Land Use, Philadelphia 2015, Transportation.

2 Responses to The Environmentalist Case for Philly Wage and Business Tax Reform

  1. Tsuyoshi says:

    I agree, a shift from the wage and business taxes to a land tax would be beneficial. As long as we are looking at wealth taxes to benefit the environment, another tax that deserves a look would be a vehicle ownership tax, based on the value or maybe the weight of the vehicle, which some other places have. Perhaps the gas tax (which certainly should be higher…) is sufficient to capture the negative externalities of vehicles, though. Bigger vehicles (which cause more wear and tear to the streets) consume more gas, after all. Is there a city gas tax already? I don’t even know.

  2. Jon Geeting says:

    Nope, the state of PA doesn’t let us tax gas at the local level. I’m not sure if we’re allowed to levy a property tax on vehicles, but that would be great. Weight would be ideal, but Blue Book value might be easier administratively.