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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

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.

Many students have been led to believe by their state-loving profs, as well as by many elementary and secondary school educators who preceded them, that the government must always be granted whatever it needs to accomplish its objectives, regardless of the costs involved. Now these collegians have discovered that the government is not their presumptive friend and will eventually turn on them if not reined in. Many of them are currently having their entire cost of attendance, including living expenses, financed by the federal government and would be facing an immediate out-of-pocket cost that someone else isn’t paying for ranging from “$27 at the Community College of Allegheny County to $409 at Carnegie Mellon University.” They are not taking it well.

Faculty and administrators who so loathe the American capitalist model of free enterprise and competition have figured out that they would have an externally imposed competitive disadvantage against their peers outside of Pittsburgh. Perhaps they’ll take a belated interest in the city’s fiscal situation. If they do, they’ll likely discover that its annual municipal budget of roughly $450 million contains more than a little fat.

Moreover, radical faculty members would have a more difficult time justifying their ardent love of statism in front of their tax-paying students if the government begins in essence biting the hand that feeds it philosophical support for its voracious desires. These poor saps must be wondering how it can be that Democrat Ravenstahl, who attended Pitt for a time, is employing the tactics normally associated with romanticized thugs like Chavez, Castro, and Ahmadinejad on his “friends.” Perhaps they’ll begin to understand how the term “useful idiots” applies to them.

My goodness, students are even engaging in anti-tax and anti-spending protests like the tea partiers they’ve been taught to despise. What’s more, they’re coming up with constructive, cost-saving ideas of their own.

Perhaps during all of this the kids will meet up with patriotic everyday Americans who will impart important lessons about how free markets and limited government are supposed to work. These are lessons that they more than likely won’t learn or even hear about at their institutions of so-called higher learning. They might also come to understand that what Pittsburgh is attempting is a mere microcosm of what Social Security has been doing to the young people of America for decades.

These would be very good things. Maybe the mayor should threaten such a tax every year.

Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog, BizzyBlog.com, since 2005, and has been a PJM contributor since 2008.
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