Humbug: Coal to the Coalition for More Taxes

Monday, December 21st marked the demise of the proposed tuition tax, also known as the “Post Secondary Education Privilege Tax” and the “Fair Share Tax”, as the City and the Pittsburgh college and university community reached an accord in which the Mayor and Council agreed to table the tax. But what has arisen in its stead brings a new set of very troubling concerns. 

 

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Tuition Tax—R.I.P.

The tuition tax, also known as the "Post-Secondary Education Privilege Tax", also known as the "Fair Share Tax" has been put to rest after weeks of almost coming up for a vote before City Council only to be temporarily shelved time and again. All along proponents had the necessary five votes and an opinion from an attorney that the tax would stand up to a court challenge.

So what comes next? Obviously the City is determined to obtain $15 million to put toward pension costs. According to early news reports on the tax being tabled, there is a collation of universities and colleges, along with some of the City’s corporate interests, that will work toward getting "significant legislation in Harrisburg". What could it be? Certainly an increase in the $52 Local Services Tax-levied on everyone who works in the City-would not help many of the same college students targeted by the tuition tax since many have jobs. And a boost in that tax would certainly be enabled for all municipalities (except for Philadelphia) since that’s what happened just five years ago when the last pieces of "significant legislation" were crafted for Pittsburgh.

All of this smacks of the "don’t tax me, tax the fellow behind the tree" mentality on the part of the college community-they won’t see a tuition tax, but would be perfectly fine with enabling a new or higher tax instead of holding the City accountable for its continued growth in expenditures in recent and coming years.

And what makes this coalition think that legislators would be agreeable to help? Just a few short months ago the City was a big part of the collapse of the initial plan for municipal pension reform (the City wanted exempted so as to pursue the parking garage lease plan). Now the "heavy hitters" want to return to the Capitol to pursue a new a pension solution? Good luck with that. What other revenue sources can there be? The City has obtained the RAD sales tax, payroll tax, casino money, etc. They need to take a much more hard line approach to their costs.

Legislature Moves to Squash Tuition Tax

With thirty co-sponsors, a bill introduced by Rep. Paul Costa would ban the imposition of the proposed education privilege tax in Pittsburgh and preclude any other municipality in Pennsylvania from enacting such a levy.  The so called “fair share tax” is highly controversial and has enraged students and prompted university officials to mount a serious opposition campaign. And rightly so: as we have pointed out over recent weeks, this tax is one of the worst ideas ever to arise out of Pittsburgh government.

 

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Legislature Moves to Squash Tuition Tax

With 30 co-sponsors, a bill introduced by Rep. Paul Costa would ban the imposition of the proposed education privilege tax in Pittsburgh and preclude any other municipality in Pennsylvania from enacting such a levy. The highly controversial so called "fair share tax" has enraged students and prompted university officials to mount a serious opposition campaign. And rightly so. As we have pointed out in Policy Briefs over recent weeks, this tax is one of the worst ideas ever to arise out of Pittsburgh government.

But seeing the virtual certainty of widespread adoption of such a tax across the state if it is implemented in Pittsburgh, the Legislature is moving to stop the ill-conceived and damaging tax before it advances any further. The Legislature will have to move quickly or it might have to make the bill retroactive. Pittsburgh could decide in a week or so to pass the bill and it could stand up to court challenge under current state law.

And that means state law is severely flawed. Indeed, Act 511, which permits the consideration of such nonsensical taxes, must be reformed to narrow the range of permissible local taxes. So rather than simply passing a bill to ban the tuition tax, the Legislature should amend the governing statute to spell out exactly what can be taxed by municipalities, eliminating "privilege" taxes not specifically permitted by the statute. And there should be few, if any, of those.

Higher Education: Target One for More City Revenue

Another City Council plan to extract money from higher education in Pittsburgh has surfaced. Under the plan proffered by Mr. Burgess the City will negotiate a payment in lieu of taxes based on the value of land on which colleges and universities sit and the value of city services provided to the students at these institutions.

The Councilman’s approach is superior to the Mayor’s plan to levy an education privilege tax on students based on the tuition they pay. Mr. Burgess would at least try to determine the value of City services used by students. However, his plans falls short for several reasons.

First, the Burgess plan would base the estimate of student service use on what the City spends on other residents. But this obviously misses the mark. Most colleges have their own campus police forces and effectively replace city police for routine patrols and non-felony investigations. Then too, how many campus fires have City fireman responded to in recent years?

Large institutions and commercial establishments also pay separately for garbage collection so one of the City’s most expensive services provided to residents is not consumed by students. Beyond these drawbacks, the City cannot provide services to the students without providing services to the faculty and administrative staff. And since many of them live in the City and pay taxes, the estimate for students would have to take that into account. A very messy problem at best.

Using the spending on residents as a measure of the amount spent per student is simply not a meaningful way to approach this issue.

At the same time, how does Mr. Burgess intend to estimate the tax revenue paid directly or indirectly by students? Many students live off campus in nearby housing and pay rent to property owners who in turn pay a portion of that rent to the City, County and school district. Their presence creates purchasing power to support shops, dining and tavern facilities that simply would not exist without that spending. Those businesses pay property taxes, license fees, LST taxes, wage taxes and payroll preparation taxes to the City. Indeed, many students are employed in the City and pay wage and LST taxes to Pittsburgh, undoubtedly at levels that exceed their usage of city services.

Finally, evaluating the value of land for the tax exempt institutions will present enormous theoretical and practical problems. The land derives a great deal of its value because of the presence of the institutions and the people, businesses and housing facilities needed to support the institutions.

In short, unless or until some organization with the resources and public confidence necessary to carries out a full blown, credible study of the taxes paid and services used by the institutions, all the talk of education privilege taxes or land taxes should be put on hold.