Pittsburgh wants to tax one of its most abundant resources: students.
The city is home to seven colleges and universities, and though their real estate is tax-exempt, their tuition isn’t, says Mayor Luke Ravenstahl, who plans to impose a 1% tax on tuition as part of his budget for 2010.
Nearly 100,000 students study in Pittsburgh, and "they’re not paying a dime for any city services they might receive," Ravenstahl says. The 1% tax would range from $20 for students at Carlow College to $400 for students at the city’s priciest university, Carnegie Mellon. It would generate $16.2 million next year, according to the proposed budget.
"He calls it a fair share tax. We call it an unfair tax," says Mary Hines, president of Carlow College and of the Pittsburgh Council on Higher Education. The group will challenge the tax in court as an end run around universities’ tax-exempt status, Hines says.
If Pittsburgh succeeds in becoming the first city to tax its students, other cities will follow, says Terry Hartle of the American Council on Education, a lobbying group for universities. "It’s a new and untapped potential source of revenue," he says.
Only 6% of Carlow students pay the full $20,000 tuition, Hines says, and they can’t afford more costs. The tax also will make Pittsburgh less appealing to students, she says. "We want them to realize they are coming to an exciting city that will welcome them with open arms. This does not do that."
Pittsburgh faces a $15 million budget gap and a deadline from the state Legislature to rescue its pension fund.
Pittsburgh’s tax-exempt institutions, like those in many college towns, have made donations in lieu of taxes: $14 million from 2004 to 2006. The non-profits’ proposal to give an additional $5.6 million over three years is "not enough," Ravenstahl says.
The controversy in Pittsburgh is the latest in a long-running town-and-gown debate over whether tax-exempt institutions contribute enough to offset loss of real estate tax revenue:
•In April, Providence Mayor David Cicilline proposed a tax on students of $150 per semester at schools including Brown University and Providence College. The schools have made voluntary contributions to the city since 2003. The tax would require state legislative approval.
•In Boston, a task force started in January by Mayor Thomas Menino wants to standardize and increase payments from educational and medical non-profits. The city got $8.4 million from 13 colleges this year and $4.9 million from nine hospitals.