Wednesday, June 13, 2007
Roadblocks to Growth
Recently PNC Chairman James Rohr, who is also the chair of the Allegheny Conference on Community Development, told a gathering of business owners that there are a few roadblocks facing Pittsburgh on its path to growth. While he is very correct in this assessment, he is very wrong on most of his analysis.
He mentions high business taxes, government fragmentation, lack of air service to Europe, and a lack of a skilled workforce as reasons for the area’s economic stagnation.
Business taxes are definitely a major impediment to economic growth in the Pittsburgh area. Businesses shoulder a very large burden of not only corporate income taxes at the state level, but also are responsible for the exorbitant local property taxes imposed by school districts and municipalities. They are often treated as “cash cows” by the governing bodies and see very little if any tax relief—except when large firms, such as PNC, are able to buffalo these governments into bestowing upon them generous subsidies to compensate for the unreasonable tax climate. Indeed Mr. Rohr’s company is receiving $48 million from state and local tax coffers to build an upscale mixed-use office building despite profits in the hundreds of millions of dollars. It’s deals like this that contribute to the high tax climate Mr. Rohr decries.
The other roadblocks mentioned: government fragmentation, lack of air service to Europe, and an unskilled workforce are red herrings at best. There is no evidence that a having one city-county system is the cure-all for an ailing area. In fact, the oldest example of a consolidated government, Philadelphia, provides evidence to the contrary. Other more recent city-county mergers, Indianapolis and Louisville, have not provided the economic boom or cost savings most proponents envision. If anything a Pittsburgh-Allegheny County merger would spread the cost of a failing City across the rest of the County.
As far as air service is concerned, the lack of direct flights to Europe is dependent upon the free market. If there were enough demand for such a flight, it would exist. Previous routes to England and Germany were abandoned by the airlines for lack of passengers—a possible reflection of the stagnating local economy. If the economy was to grow and the demand would rise to adequate levels, no doubt an airline would step in and respond. Or maybe PNC could use some of their profits to start an airline with flights from Pittsburgh to Europe.
One of the region’s bragging points has always been a skilled workforce. In fact, nearly 25 percent of Allegheny County’s workforce holds a college degree (compared to 14 percent in Philadelphia). If the area lacks a skilled workforce, it may be because they have moved elsewhere to find employment.
There are many obstacles in the way of Pittsburgh’s economic recovery—Mr. Rohr just turns a blind eye to them. He never mentioned the problems with unions, specifically public sector unions which are crippling mass transit and the educational system, nor does he mention the regulatory environment that mandates wages or collective bargaining. Instead, he continues to echo the same message that the area leaders have clung to for years rather championing real reform.
He mentions high business taxes, government fragmentation, lack of air service to Europe, and a lack of a skilled workforce as reasons for the area’s economic stagnation.
Business taxes are definitely a major impediment to economic growth in the Pittsburgh area. Businesses shoulder a very large burden of not only corporate income taxes at the state level, but also are responsible for the exorbitant local property taxes imposed by school districts and municipalities. They are often treated as “cash cows” by the governing bodies and see very little if any tax relief—except when large firms, such as PNC, are able to buffalo these governments into bestowing upon them generous subsidies to compensate for the unreasonable tax climate. Indeed Mr. Rohr’s company is receiving $48 million from state and local tax coffers to build an upscale mixed-use office building despite profits in the hundreds of millions of dollars. It’s deals like this that contribute to the high tax climate Mr. Rohr decries.
The other roadblocks mentioned: government fragmentation, lack of air service to Europe, and an unskilled workforce are red herrings at best. There is no evidence that a having one city-county system is the cure-all for an ailing area. In fact, the oldest example of a consolidated government, Philadelphia, provides evidence to the contrary. Other more recent city-county mergers, Indianapolis and Louisville, have not provided the economic boom or cost savings most proponents envision. If anything a Pittsburgh-Allegheny County merger would spread the cost of a failing City across the rest of the County.
As far as air service is concerned, the lack of direct flights to Europe is dependent upon the free market. If there were enough demand for such a flight, it would exist. Previous routes to England and Germany were abandoned by the airlines for lack of passengers—a possible reflection of the stagnating local economy. If the economy was to grow and the demand would rise to adequate levels, no doubt an airline would step in and respond. Or maybe PNC could use some of their profits to start an airline with flights from Pittsburgh to Europe.
One of the region’s bragging points has always been a skilled workforce. In fact, nearly 25 percent of Allegheny County’s workforce holds a college degree (compared to 14 percent in Philadelphia). If the area lacks a skilled workforce, it may be because they have moved elsewhere to find employment.
There are many obstacles in the way of Pittsburgh’s economic recovery—Mr. Rohr just turns a blind eye to them. He never mentioned the problems with unions, specifically public sector unions which are crippling mass transit and the educational system, nor does he mention the regulatory environment that mandates wages or collective bargaining. Instead, he continues to echo the same message that the area leaders have clung to for years rather championing real reform.
