Tax the College Students?

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Call the affiliated class Rent Seeking 101. Facing gigantic pension obligations for retired city employees that Pittsburgh, Pennsylvania cannot afford, the city is getting creative. The mayor has announced plans to create a 1 percent tax on college tuition as part of his 2010 city budget. From an article in USA Today:

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.

Ravenstahl calls this the fair share tax. The logic of this is dubious. There are no cities in America that tax students. Though politicians sometimes propose this sort of plan, it never goes far. In part this is because of the tax-exempt status of colleges and universities and in part because students already pay money to attend school and the tax would be a further strain on those already stretched by tuition obligations.

Most college towns also recognize that academic centers are mostly an economic revenue source source for a city, not an economic drain.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer