22 Dec 2009
Finally this nonsense in Pittsburgh is over.
Mayor Luke Ravenstahl had planned to tax local university students a percentage of their tuition. He rescinded the plan after universities promised to donate more to the cities' coffers.
Forget the specifics of this case. Why is a plan to tax university students, in general, foolish? Well, it's complicated. I barely can grasp the reason all at one time.
Partly because it means the city isn't looking to save money in other ways.
Partly because it is contrary to laws that grant institutions tax-exempt status.
Partly because different kinds of taxes means more bureaucracy to collect those taxes.
Partly because governments should always be trying to become leaner.
Notice how I say partly. Take any one of these ideas by itself and put it in the ring with the idea of taxing tuition, and you'd have one heckuva pay-per-view fight. Mathematicians drop-kicking each other with all sorts of algorithms, then tag-teaming out for sociologists to ddt a new theory of community-building.
The big question is what effect do tax-exempt institutions have on any one city? In some cities, tax-exempt institutions comprise 40% of the total value of land and property. For examples of tax-exempt buildings, think public universities (actually, private ones, too, for reasons that are beyond me), hospitals, or government structures. An average city might have, guessing here, 10% non-taxable property. If 40% of a city's land is tax-exempt, that's a large tax burden being borne by the rest of the city. In fact, that's why Universities agree to pay money to the cities they reside in - they understand that they get the benefits of city services and that in the long run they may be forced to pay even more should a court ever settle the issue definitively.
What's the issue for the courts? It's the question, "Isn't it a good idea to charge fees for services rendered? That way everyone pays their share." We'll hear a lot about equity (i.e., fairness), equality, and every fee-for-service example people can think of (what about parks and recreation, or garbage pickup). I agree with the fee-for-service model in some instances and not in others, and may even agree with formalizing the fees tax-exempt properties pay a government. However that argument has not been made to anyone's satisfaction yet, especially when that argument includes twisting the truth:
"We lose $50 million each year because we don't tax non-profits" is a misrepresentation of the truth.
"We tax our non-exempt properties an additional $50 million each year because they are paying the tax-exempt properties' taxes" is a truth.
So to close, keep your ears to the ground for how this issue plays out. Don't drink anyone's Kool-Aid.