Philadelphia taxes created King of Prussia, lost jobs

It frustrates me that so much of the Delaware Valley’s gain is Philadelphia’s loss. That is, much of what makes this metro region great is development that could have helped make this city even greater.

In researching this thesis and making mention of the 2003 mayoral election between John F. Street and former oft-Republican mayoral candidate Sam Katz, I have referred several times to an essay written on that election by Dr. Jeffrey Kraus, a Wagner College professor of politics and government.

Entitled A Tale of Two Cities Revisited: The Philadelphia Mayoral Election of 2003, Kraus mostly makes the case that national politics trumped the normal rules of urban mayoral politics. Anyone unsure of this can see the popular Tigre Hill documentary Shame of a City for confirmation.

But, something always catches my attention when reading it.

Katz’s campaign focus was – before “the bug” – creating a business friendly Philadelphia. He wanted to slash the city’s wage tax from 4.4 to 3.5 percent by issuing a $750 million bond to be repaid over the subsequent decade.

Kraus continues:

According to Katz, Philadelphia faced three problems: a high crime rate and low quality of life, the exodus of the young and college-educated, and tax policies that create an unfavorable business climate. Katz said that one of his goals as mayor would be to attract 250,000 residents into the city over a 15 year period. By cutting business taxes, Philadelphia would retain businesses. As Katz explained it, “our tax structure created Cherry Hill and King of Prussia.” (Emphasis added)

See, this region is blessed, some might say, with the second largest mall in the country and Cherry Hill, N.J., another outpost of business and shopping. What’s more, the region features the world’s largest management services company in the Vanguard Group, located in Valley Forge, the pharmacuetical giant Merck & Co. has major offices in Horsham and Blue Bell, and the credit card services corporation MBNA, Du Pont Corp. and Christiana Health Care System all are based in Wilmington, Del.

I could, of course, go on, but the point is made. These are among the largest employers in the region, accounting for tens of thousands of jobs and millions in taxable assets and profits.

They aren’t based in Horsham or Wilmington for the view or the chance at a fine skyscraper. They are based in communities that offered enormous tax incentives because, well, increasingly, communications development means you don’t necessarily need to be based anywhere. A half century ago, businesses paid for the privilege to be based in a major city. That has become less and less the case, but Philadelphia hasn’t caught up.

Imagine the population boom, how much denser Center City would be, where the additional funds could go – like further developing a massive, world class, effective, clean and efficient mass transit system – if the King of Prussia mall, Merck and the rest were in Philadelphia.

We need someone to attract these and others back to grow this city into the international destination it once was.

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  1. Pingback: King of Prussia: the child of Philadelphia tax structure « Christopher Wink

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