Testimony to House Finance Committee
David Thornburgh, President and CEO, Committee of Seventy
June 2, 2016

Testimony to House Finance Committee David Thornburgh, President and CEO, Committee of Seventy June 2, 2016  Good morning, Mr. Chairman and members of the Committee.  I’m David Thornburgh, President and CEO of the Committee of Seventy, Philadelphia’s independent advocate for better government, and it’s my pleasure to join you here today.

Let me begin at the end.  In my view, there is nothing in your hands that is more important to growing jobs in Philadelphia and Pennsylvania than the HB1871 bill you are considering today.

I’ve held civic leadership roles in the Philadelphia region for over 30 years. For twelve years I served as Executive Director of the Pennsylvania Economy League and another seven as Executive Director the Fels Institute of Government at the University of Pennsylvania. I also spent 7 years working with entrepreneurs and startup companies at Wharton’s Entrepreneurial Center. During my career I have worked on initiatives to strengthen our schools, build the quality of our workforce, grow our arts and culture sector, and increase the vitality of our cities and towns.

In all of these efforts, there is one constant: Philadelphia’s high and unusual wage has been an enormous barrier to the economic growth of the city – growth that would provide jobs for our college graduates, growth that would lessen the push on young families to leave the city, growth that would create new companies and new markets to employ our residents and attract the best and brightest the world has to offer. Unless and until we remove that barrier, and the City’s wage tax is dramatically and fairly reduced, Philadelphia will continue to lag our competitors and the nation as a whole.  Without a fundamental resetting of our competitive landscape, our prospects to escape the dubious distinction as the nation’s poorest big city are dim.  (I should add that Detroit, one other big city also burdened by the wage tax, would still be the nation’s poorest big city but for the fact that because of population and job loss it’s no longer a big city—not the future we have in mind for Philadelphia.)

In past testimony around this issue, dating back almost twenty years, I would at this point dive into the numbers, into the analysis about the harm that our tax burdens and tax structure have brought to this city. I’m not going to go there today. That ground has been plowed...and plowed, and plowed again. Going back in time, between the fine work of the City Controller's Office, the Tax Reform Commission, City Council staff, the Mayor's office, independent researchers from the Federal Reserve, the Wharton School, the Center City District, Temple University, and the Economy League, I think the harmful effects of the wage tax have been demonstrated way beyond any reasonable doubt. That debate, in my mind, is over.  The time for action is here.

What has always stymied efforts to lower the wage tax to grow jobs is a legitimate question about how to bridge the revenue gap to maintain vital city services as employers and new companies learn about and take advantage of a more competitive tax picture. This proposal to trade wage tax cuts for increased commercial property taxes solves that problem simply, and elegantly. The fact that the proposal has such support among those who make their living building and leasing commercial real estate clearly testifies to the problem it solves.

As you may know, my father Dick Thornburgh served as Governor from 1979 to 1987, when Pennsylvania was suffering through the most wrenching economic transformation in its history. Unemployment peaked at an unimaginable 15% in 1983. In response to that crisis, my father’s first priority was to improve Pennsylvania’s overall business climate. To quote from his memoirs “High taxes, excessive regulatory burdens…and a generally antibusiness mentality in the bureaucracy posed substantial challenges to private sector growth.”  In response he and his capable team, with the support of legislative leadership, undertook an aggressive plan to lower taxes, reduce the cost of government, and make strategic investments in the Commonwealth’s future economy.

The results were striking.  By the end of his two terms the Commonwealth’s unemployment rate ran consistently below the national average.  From 15%, it declined to 5.1% percent, 43rd among the 50 states, when he left office.   The business startup rate went from well below the national average to well above it.  The Pennsylvania economy produced over 50,000 new businesses and 500,000 new jobs, increasing at rates twice the national average.

It’s time for Philadelphia to learn some lessons about job growth from Pennsylvania’s past. When it comes to growing private sector jobs, our first priority must be to improve the city’s business climate, particularly to reduce the harmful wage tax, the “temporary tax” passed in 1939 that has cursed our economy now for over seventy five years. This is a rare moment of opportunity, to reverse years and years of well-intended but misguided tax policy that has weakened and eroded this city job base. You have the chance to make a once in three generations decision to grow jobs in Philadelphia and Pennsylvania.  Since Philadelphia is so different in its tax structure from to the rest of the Commonwealth’s local governments, in passing this bill you can also support a change that will improve Philadelphia’s ability to create jobs without having to consider the complications of making other changes to local tax structure in other parts of the Commonwealth. Philadelphia will no longer be quite so different—in a bad way--from the rest of Pennsylvania, or other big cities, or other jurisdictions within the region.

Thank you for the opportunity to speak with you, and I urge you to support this measure.