One of my concerns when naming The First Street Journal was that I wanted to concentrate more heavily on economics, and, to be honest, The Main Street Journal name had already been taken, actually by more than one site. Mrs Pico suggested The Center Street Journal, which I considered, but, at the time we actually lived on Center Street, in Jim Thorpe, so even though I use my real name, I thought that unwise.

More, Center Street could be interpreted as implying that I am a political centrist, and I most certainly am not.

Sadly, I’ve spent so much time on politics, that I’ve neglected economics.

Philly renters should probably expect new leases to include higher rent to account for new tax assessments

Increases in rent because of landlords’ higher property tax bills will hit low-income renters the hardest.

by Michaelle Bond | Friday, July 15, 2022 | 6:00 AM EDT

Anthony Krupincza, who owns five rental units in North and West Philadelphia, usually pays his tenants’ water bills. But now that some of his property tax bills will nearly triple because of the city’s new assessments, he’s telling new tenants they have to pay. And he’s raising rents for tenants who move in or renew.

“I have to explain to them it’s not like I’m making more money. It’s not like the extra money is going in my pocket,” he said. “The difference is to pay the tax bill. And if you really do the numbers, it doesn’t fully pay for the tax bill.”

That The Philadelphia Inquirer printed this is a bit amazing, because it teaches a lesson — at least for anyone willing to read and learn — that has been known for a long time, but wholly ignored by many: when the expenses of a business are increased, the prices the business must charge must also increase, or the business fails. The left think that we ought to tax those evil ol’ corporations more, but all that corporations do is pass on their costs of doing business, and taxes are very much a cost of doing business, on to their customers. The final consumer of their products, the individual, must pay all of the taxes heaped upon businesses throughout the production chain.

Rent increases due to higher property taxes demonstrates only a single level, but it’s something on which to learn for the multi-level.

Think about the price of a gallon of milk, which like everything else these days, is experiencing significant inflation. Included in the price of a gallon of milk are:

Photo by Dana R. Pico, © July 15, 2022. Free use is granted, with appropriate credit. Click to enlarge.

• The taxes imposed on the dairy farmer for the fuel used around the farm;
• The fuel, business, and income taxes paid by the trucker who takes the raw milk to the dairy processing plant;
• The fuel, business, and income taxes paid by the producer who manufactures the packages for milk;
• The fuel, business, and income taxes paid by the trucker who transports those packages to the dairy;
• The fuel, business, and income taxes paid by the dairy which processes and packages the milk;
• The fuel, business, and income taxes paid by the trucker who hauls the packaged milk to the grocery store; and
• The fuel, business, and income taxes paid by the grocery store.

All of those expenses are bundled into the price you have to pay for that gallon of milk. If everyone up the production and delivery chain doesn’t have all of his expenses paid, he goes out of business! How hard is that to understand? And if any elements in that supply chain fail, the consumer doesn’t get to buy milk.

We noted here that the gallon of 1% milk at the Kroger on Eastern Bypass Road in Richmond, Kentucky was 99¢ when Donald Trump was President, rose to $1.79 on January 4, 2022, and was up to $2.19 by February 23^rd.

It’s too soon to say the extent to which rents across the city might rise as a result of the city’s first property reassessment in three years, which increased Philadelphia’s total property value by 31%. Tax bills based on the new values will be mailed in December and are due March 31.

But landlords in the business of operating rental properties aren’t eligible for the city’s tax relief programs that were adjusted to soften the impact of the reassessment. So they will most likely pass on at least some of the extra costs in taxes — in addition to the operating costs inflation has driven up — to new and returning tenants, who already have faced historically high rent growth.

Of course, landlords in America are frequently thought of as Snidely Whiplash, tying Sweet Nell to the railroad tracks, so naturally Philadelphia wouldn’t make them eligible for programs to soften the impact of the reassessment. 52.8% of Philly’s housing units are owner occupied, according to the Census Bureau, a lower rate than the 64.4% nationwide, which means that 47.2% of Philadelphians rent their homes, and 47.2% of Philadelphians are not going to see any relief from programs to soften the impact of property value reassessments. After all, giving landlords relief would be welfare for the well-to-do, so who cares about them? But the lesson ought to be obvious: increasing expenses on landlords,^[1]Full disclosure: My wife and I own rental property, and are technically landlords, but we are not running that business for a profit. We bought a house last December, to rent to Mrs Pico’s … Continue reading increasing expenses on any business, means increasing prices downstream. Politicians, Democrat and Republican alike. don’t want you to know, and hope that you are too stupid to figure it out, so that they can raise taxes on businesses, and the public will remain serenely unaware that they actually raised taxes on individuals.

That’s why City Councilmember Kenyatta Johnson said his “Save Our Homes” tax relief plan included $15 million in rental assistance in the fiscal year 2023 budget “to support those individuals who will be significantly impacted in seeing an increase in their rents” because of increases in tax assessments. Black and Latino neighborhoods face the highest increases in their tax bills due to the new assessments.

“We wanted to make sure not only homeowners were protected but also renters as well,” Johnson said.

Well, of course the Inquirer had to let readers know that black and Hispanic citizens would be hurt worst, because that “anti-racist news organization” always has to come up with a racial angle, but there are plenty of working-class whites living in the City of Brotherly Love as well, and their rents are going to rise as well. One wonders if Kenyatta Johnson care about that!

Economics, on the other hand, definitely does not care: there are no different principles of economics based on a person’s race or ethnicity. The Inky managed to eke out an economic lesson for its falling readership, but it might not be a lesson the editors actually wanted their readers to learn.