Pittsburgh Considers Student Tax

October 14, 2009

In Pittsburgh, a college student head tax is being considered to help cover the cost of the city’s Recovery Plan, which requires the city to raise its pensions fund by $10-14 million a year. A similar idea was proposed in Rhode Island last May—though eventually aborted by Providence Mayor David Cicilline—and written about on this blog.

A student tax seems reasonable at first. Those that consume more public services should pay more taxes—the benefits principle of taxation. Except in this case the tax isn’t going to pay for university related things, it’s presumably paying for government pensions (and one can’t assume pension holders are overwhelmingly Pitt graduates). This local government also doesn’t fund higher education. One may argue that the city pays for police and sewers and other things that students enjoy, and the city would have more funds for pensions if not providing these things for students. Students don’t pay much local taxes, so they need a tax increase to pay their fair share. Although the police are unlikely spending their time fighting street battles with college students, this argument might be valid. But students pay less local taxes because their university pays less local taxes.

There is a justifiable way to raise money from universities in Pittsburgh—end their tax breaks. Universities have some tax exemptions like with property taxes. A major reason for these reductions in tax liability is a university’s supposed social benefit. But the social benefit from universities, arguably, doesn’t exist (benefits of a university education are mainly reflected privately through higher earnings of college graduates). And if the universities have an economic benefit to the city, it’s obviously not enough to justify the tax breaks if the Mayor is calling for a tax increase. Pittsburgh should treat all property equally and call it neutrality.


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