Lawsuit seeks to strike out the “jock tax”

Lawsuit seeks to strike out the “jock tax”

A lawsuit filed in Allegheny County Court of Common Pleas wants to eliminate the City of Pittsburgh’s “non-resident sports facility usage fee” (fee) due to it “unfairly levy[ing] a 3 percent earned income tax on visiting professional athletes while taxing all other residents at a 1 percent income tax.” A lawsuit over a similar athlete tax was filed several years ago in Cleveland.  

The fee was authorized in a 2004 statute that made several changes to Pittsburgh’s tax structure—it created the payroll preparation tax, phased out the business privilege tax, eliminated the mercantile tax, lowered the parking tax and permitted an increase in the local services tax (then known as the occupational privilege tax).  The statute permits a city of the second class to enact the fee at “a flat dollar amount or a percentage of the individual’s income attributable to such individual’s usage of the facility.” 

The city chose the latter and set it at the maximum percentage allowed by the statute.  The fee also falls on entertainers “as the result of services performed at a publicly funded facility within the city” and is expected to raise $5.4 million in 2020.  The city code enumerates some, but not all, of the facilities (PPG Paints Arena, Heinz Field, PNC Park, Petersen Events Center and Stage AE) where the fee is levied. 

Paying the fee exempts a non-resident from paying the combined 3 percent earned income tax to the city and Pittsburgh Public Schools. The statute states that “should a court of competent jurisdiction determine this provision to be invalid for any reason, persons subject to the publicly funded facility usage fee shall not be exempt from any previously applicable earned income tax.” 

At this point non-residents are subject to the city’s wage tax but are credited for an earned income tax levied in their home municipality (quite common in Pennsylvania).  Only a non-resident/performer who resides in a municipality where there would be no offset would presumably be subject to the present earned income tax should the fee be done away with. 

Combined with the district’s wish to reclaim the 0.25 percent share of earned income tax a lawsuit overturning the fee would lead to a decrease in $23 million in revenue for the city.  Making commensurate spending reductions would reduce next year’s proposed operating budget to $585 million (4 percent lower).