Monday, November 30, 2009

4 Tuition Tax Myths and 1 Suggestion

I feel the need to dispel some myths regarding the "fair share" tax.

1. Income tax, property tax, and sales tax are not sin taxes. Don't we still tax text books?
'Councilman William Peduto took the same tack, saying that taxes are often placed on "sin" products, like alcohol or tobacco -- but not on self-improvement. "Why would we ever tax education, where somebody is trying to better themselves?" he asked.'
2. College students are not the only ones who pay the drink tax. Many, many non-college students visit the many bars and restaurants throughout the county and share this burden. It is also important to mention here that the aforementioned drink tax is a county tax.
"Let's face it, we [college students] are the ones that pay the drink tax"- graduate student, Mackenzie Farone

If you owe income tax to the city of Pittsburgh, you can deduct the amount you paid on your tuition tax against your income tax. This would serve city residents in two ways. First, it would prevent any ridiculous double-taxing and calm fears of anyone working their way through college while living in the city that they will be taken advantage of. Second, it might encourage city dwellers to take a class at a local university with the inherent 1% discount. Not much of a discount, you say? Not much of a tax, I say, but every little bit helps.

Summary:

No one wants to pay taxes, but the city is desperately running out of money and is running out of methods they can use to tax because of antiquated state laws. The city would love to tax non-residents who work in the city, like New York City and many other cities, but the state of Pennsylvania won't allow it. The city would love to slap a property tax on non-profit buildings, but once again the state won't allow it. Heck. The state will probably crack down on this tax as well, but the city has to keep trying to come up with innovative solutions in a hostile environment.

What can I say? I love this city, and I don't want it to run out of money. I want to keep all of our libraries open. I want our roads to be paved and our trash to be collected, and most importantly I want all the police officers and other city workers who have put their time in over the years, to continue to have their pensions paid. So if we need to come up with creative taxes that don't further stress our residents, I'm for it. Because when it comes down to it, if it's a choice between me paying 4% on my income tax or the college students coughing up another 1% on their $50,000 per year education, you're not going to find too many residents (who also manage to pay property taxes and income taxes and county taxes and state taxes) shedding a tear for the college students.

Request:

Can someone actually figure out if this tax is legal or not, so we don't have to waste any more time debating it?

7 comments:

Jami Broom said...

nicely laid out post!

i sincerely believe the city could find a different way to come up with the cash every year.

i like the idea of taxing fast food myself. and raising taxes on alcohol & cigarettes even more.

the educational institutions do more to keep jobs, people, and the economy moving than any other entities, besides maybe hospitals. last thing we should do is TAX them; we should encourage them to keep expanding and churning out bright young adults AND doing excellent research that makes Pittsburgh known for its top-notch universities.

if the city needs more industry to make up for the cost, perhaps LOWERING taxes for new businesses would bring them back in??

Jami Broom said...

Oh, and I think it is legal, at least according to wikipedia! it's just not politically sound.
http://en.wikipedia.org/wiki/Non-profit_organization#United_States

also, i like this person's idea http://providencedailydose.com/2009/11/30/paolino-gets-it-right/ of having the state share revenue from hospitals, but I don't know how PA is currently set up for this. ?

from what I've read no other cities are doing this - Providence tried, but opted to have voluntary payments in lieu of upsetting their 100 year old relationship with universities with a tax.

Bram Reichbaum said...

My suspicion is that since a State Rep. jumped forward to propose a law banning taxes on tuition, such a law probably would be fine at present. In truth I don't really see a strong argument for why it wouldn't be kosher. But I don't think there's a way for us to know for sure until it gets before a judge.

Your suggestion about deductions from income taxes is great -- but somehow I think the administration would be content to "double tax" working students, property owning students, etc. Because it's all about filling a hole of yay size. Of course I guess Council could amend the bill and give the mayor an ultimatum: your tax passes this way or no way.

It occurred to me that we could be underestimating something: we would be the first city in the country to enact this tax. And since universities NOWHERE want to see this idea catch on, they could actually go out of their way to make a big huge disparaging mockery out of Pittsburgh in order to "nip this thing in the bud". That would be unfortunate for us.

Bram Reichbaum said...

You don't allow anonymous comments, but someone who wishes to remain anonymous would like to share this with you. Since it's helpful I'm cooperating:

Illyrias:

State Act 55 of 1997 - the infamous "Institutions for Purely Public Charity Act" is what disallows municipalities around the Commonwealth from levying taxes on those organizations covered by the statute.

http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=PDF&sessYr=1997&sessInd=0&billBody=H&billTyp=B&billNbr=0055&pn=2575

This is the Act, as passed, in 1997.

Educational institutions, hospitals, etc., are all covered here at the state level.

This is the Act we must contend with because it is what the Commonwealth's "non-profits" hide behind, such as UPMC, Highmark, West Penn/Allegheny, etc.

Not to mention University of Pennsylvania Hospitals, Temple University Hospitals, Independence Blue Cross/Blue Shield, etc.

Just wanted to share some information with you.

Giles Howard said...

Why isn't anyone talking about budget cuts to make up the difference? I'm tired of the idea that citizens should simply pay more taxes whenever a government -- local, state or national -- decides it simply can't do without any of its current projects and needs more money. Government is parasitic by nature and will always try to expand rather than cut-back.

Also, I think we should leave the libraries out of this discussion. The Board of Directors offered a perfectly good plan to close under-utilized branches in order to save money long-term whereas the city's elected officials would prefer to score political points with a short-term solution partially funded by taxing students -- citizens of this city who fund their own school library systems.

I understand that you want the city to solve all of its problems without taxing "residents" but I'm a student and a resident of this city just as many of my peers are. I grew up around here, I've always planned on coming back here after grad school but my fellow Pittsburghers are showing a really disturbing willingness to throw the city's weakest constituency under the bus in order to solve the city's budget problems.

carpetbaggery said...

It strikes me as disingenuous to suggest that college tuition should be taxed because students cost the city money.

A) These services are already budgeted and paid for through existing taxes. These services are NOT what is sinking the city budget.

B) The payment of a tuition tax will be used to help pay for city pensions, not for city services in Oakland.

Using this argument, we could raise anyone's taxes by saying that, in some way, they cost the city money.

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