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A Tax You Can (Almost) Like

Taxing college tuitions, though a really bad idea, has significant surface appeal.

by
Tom Blumer

Bio

December 18, 2009 - 12:00 am
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The Steel City may soon come to be known as the Steal City.

In the midst of serious fiscal difficulties, 29-year-old Pittsburgh Mayor Luke Ravenstahl, who is well on his way to becoming the worst “boy mayor” since Cleveland’s Dennis Kucinich in the 1970s, has proposed a 1% tax on tuitions charged at institutions of higher learning within his city. He apparently has the support of a majority of the City Council. By the time you read this, the tuition tax could already be a reality.

Even though it’s an obvious example of intergenerational theft, and even though I would never ultimately support it, in some ways I almost like the idea.

Don’t get me wrong. I don’t think that any government entity can tax its way to prosperity, least of all a city that has lost about 25,000 people or over 7% of its population since 2000, and almost 50% since 1960. Pittsburgh’s serious problems, which include persistent crime, massive tracts of vacant or abandoned land, and flirtations with municipal bankruptcy, aren’t going to be solved by trying to extract more dollars from people who can have the final say by moving with their feet, as so many others have before.

The mayor’s intended use for the money is, as the Associated Press describes it, “to help pay for pensions of retired city employees.” This is a tax that if used as advertised (I know, that’s a stretch) literally takes money from the mostly young and passes it directly to the old with no kind of meaningful benefit provided in return — hence my “Steal City” nickname.

Whether the money would even solve the problem appears far less than certain. The Pittsburgh Post-Gazette reports that the pension fund involved “holds just 31 percent of what it needs to meet its obligations.” The $16.2 million the tax might raise is well short of “the $189 million the pension fund will need in the next two years to save it from a state takeover.”

The mayor’s discussions with the city’s public and private universities have been more like a mob shakedown than an attempt to fairly determine what may be legitimate and heretofore unrecognized extra costs the schools may be imposing on the community. Of course, those costs, if ever identified, have nothing to do with whether retired police and firemen continue to get their monthly pension checks. The mayor has demanded that the schools cough up $5 million a year voluntarily to avoid having the tax imposed. (In light of the information in the previous paragraph, assuming that nothing is done about costs, how is $5 million even in the neighborhood of being enough?) One university president bluntly stated that she “does not negotiate with an ax hanging over” her head.

The mayor’s tactics, as well as the tax’s targets, inadvertently reveal the levy’s hidden beauty.

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