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Pittsburgh Poised to Impose Tax on Students

3 min readBy: Joseph Bishop-Henchman

Pittsburgh, Pennsylvania—home of the Alleghany County poured drink tax, the Pennsylvania film tax credit, crushing state corporate taxes, and out-of-state taxpayer flight—is having trouble raising enough money to pay for its public services, like bungled government employee pensions. One option would be to reverse course by lowering taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. burdens, pruning services to the necessities, and becoming welcoming to business activity so as to set up the area for economic growth.

Another option is to preserve the status quo and just grab cash from some underrepresented minority. Guess which option Pittsburgh leaders are going for?

On Wednesday, the City Council is expected to give preliminary approval to Mayor Luke Ravenstahl’s proposal for a 1 percent tuition tax on students attending college in Pittsburgh, which he says will raise $16.2 million in annual revenue that is needed to pay pensions for retired city employees. Final Council action will be on Monday.[…]

“It’s really a disappointment that we’re in this situation,” Mayor Ravenstahl said. “Our colleges and universities are giving less and less while they increase tuition and executive pay and expand their campuses, removing high-value land from the tax rolls. The cost to provide public safety and public works services continues to increase, but our revenue continues to decrease.”

The tax, which would take effect as early as July, would range from about $20 a year for students at cheaper schools like the Community College of Allegheny County to just over $400 for students at the city’s priciest university, Carnegie Mellon.

So, “all we have are universities, so we’re going to impose disproportionate taxes on them”?

Our own Justin Higginbottom has an op-ed in the Pittsburgh Business Times on this unjustifiable proposal:

First, let’s recognize the taxes that Pittsburgh students do pay. When students buy stuff (and they buy a lot of stuff) they pay the Allegheny County sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. (1% rate) along with the Pennsylvania sales tax (6%). And when students buy beer (and they buy a lot of beer), they pay the county beer tax (7%) on top of the sales tax. If students work, they pay the Pittsburgh wage tax on all income-3% for residents and 1% for non-residents. Those students renting off-campus pay local property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es in their rent price.

So what taxes are students in Pittsburgh not paying? The students themselves get no exemptions at all, but the colleges they’re attending do. Educational institutions in Pittsburgh, like most others in the country, do not pay property taxes. And local governments rely heavily on property taxes. Students benefit indirectly, probably paying somewhat lower tuition and on-campus rent. Those are the taxes students are not paying-and the “Fair Share Tax” makes no change to them.

A debate about whether the city should subsidize higher education is worth having. If the city thinks colleges are not worth giving a property tax break, then those breaks should be repealed. But city officials shouldn’t dream up a convenient tax rate to charge students and call it fair. That mentality leads to fuzzy policy justifications and a poor tax policy.

The city claims the 1 percent tuition tax would only cost students between $27 and $400, depending on the university’s tuition. But a couple hundred dollars can be a lot to a student. And the amount of the tax is almost beside the point. Students should not be singled out on false or undefined pretenses to pay for the city’s liabilities.[…]

A truly fair tax system would apply neutrally to all consumers and industries. This means that groups within the population, however able, should not be punitively targeted to raise revenue, however politically popular it is to do.

Read the rest here.