The 6 Pack Economist

Living in the northeast super city corridor (Washington DC to Boston Mass) I am used to reading about all the different taxes that get thrown around.  From Philadelphia city wage tax to 12 dollar cigarettes in New York City the region in very tax happy in general.  I am not against taxes.  I think we need them for many community based projects that the private sector simply won’t do or can’t do for a price people are willing to pay.  That being said I hate taxes that are counter productive, like Philadelphia wage tax, or just wasteful like cigarette taxes that go to programs that will be around after everyone finally quits smoking.

My personal and what has been historically accurate view is that government is the most wasteful organization to dump money into.  To list the sheer amount of waste that goes on is too much for a blog read by about 4 people.  Similar things happen in the private sector also but their (used to be at least) consequences to this, like losing your money.  Current bail-out excluded, government usually gets more money for failure then success.  In the government if you run your department more efficiently, thereby reducing your budget, you do not receive a bonus; instead you lose power as some other department takes your budget surplus. 

I have tried to sell the idea of taxes as the purchase price of government services for an area.  So instead of looking at taxes as something that is just taken from you, think of it as the purchase price for government services.  Perhaps if we looked at government more like we look at say Walmart, Target, or Best Buy perhaps we can reward those governments that give us the best bang for the buck. 

Let’s take Philadelphia wage taxes.  Back in the fifties or sixties (I can’t be bothered to look it up) they put this temporary tax on income to build something or other. Back then our economy was based around manufacturing and large labor forces.  So if you wanted access to large labor pools you had to be in the city.  The seventies and eighties changed the standard manufacturing economy (for better or worse).  What replaced it was a service oriented economy and smaller work forces.  Without the need for access to large labor forces companies moved out to the suburbs to avoid the wage taxes (not to mention the oppressive business taxes).

This brings me to the conclusion that when you offer less for the money you have to lower your prices.  This is what happened to Philadelphia, except that instead of lowering their prices to service more customers (residents and businesses) they kept them at the same high rate or only marginally lowered them. The large labor force offered by Philadelphia did not matter, nor did Philadelphia have name recognition like New York City (which is why New York City can run the tax system they do).  The mass exodus of highly paid people and service based businesses soon moved to the suburbs. This began to take its toll on the city. 

I have worked in Philadelphia many times both in the out skirts and center city region.  What I can honestly say is that I have no idea where the wage tax went.  Simple things were not done.  Trash is piled in corners on the streets, abandoned cars on major streets are ignored and just general disrepair is rampant.  Certain portions of the city were great like center city or old city, while other portions just needed general “take care of this crap” to be great.  Of course other areas would require a Marine escort, but we can pretend they are not there like the rest of city hall currently does.   This leads me to the fact that what I get by working in the city or god-forbid starting a business (even more frustrating) in the city is not worth the price paid to do it.