Alternative to Taxes?
By Robert Lovenheim
The Beatles sang about taxes on their Revolver album (Taxman, 1966). Has anyone since found alternative systems for raising public revenue?
Web guru Jaron Lanier suggests in his book, “Who Owns the Future” that each of us should receive a cash credit from sites like Facebook and Google every time they use the data we supply by our searches and clicks. The credits would be 100ths or 1000ths of a penny, but this could quickly add up. This revenue stream could then be directed at municipalities from the cash credits generated by residents.
That may seem radical but something similar is already in practice; part of the bill we pay each month on cable TV goes to the municipalities in return for the right to operate the franchises. Now, is a revenue stream from internet data collection that different?
You may have seen signs on commercial properties along route 209 in Middle Smithfield saying “LERTA approved.” That stands for “Local Economic Revitalization Tax Assistance.” It is a PA law allowing municipalities to grant a sliding-scale ten-year tax abatement to encourage new businesses to build buildings. Smithfield does not have LERTA authorization because we feel we don’t need it to attract new businesses.
What has rarely been explored as out-of-the-box thinking is whether a municipality can actually partner with a business in a new form of a Public-Private Partnership (PPP). It would probably need the formation of a development authority, much like our Smithfield Sewer Authority, that can do business with greater flexibility than the Township. Instead of tax abatements, the authority would issue tax credits held as equity in the project. The tax credits would earn income, like any investment partner, for the length of the contract, but the municipality would have rights to continue or sell the credits after an agreed-upon length of time.
Remember how the US Government bailed General Motors out of bankruptcy in 2009 and then converted the loan to equity (61% in that case)? As shares rose, it turned out to be a very good deal for US taxpayers. What I am describing is not so different except the equity invested is tax credits, not cash.
Could it work here in Smithfield? Would it help keep a lid on new taxes? Is it even legal in PA? It may be worth more discussion, and more ideas are welcome.