Thursday, November 12, 2009

The Fair Post

On the "Fair Share Tax". First things first:

In a pronouncement that could complicate final passage of the 2010 budget, Controller Michael Lamb said he's not yet convinced that the tax can be enacted without state approval. (P-G, Lord and Schachner)


But Bob Kassoway, executive director of the House Finance Committee, under Democratic control, said the city probably doesn't need state approval, noting that the Local Tax Enabling Act's nickname, decades ago, was "the tax anything act." (ibid)

This mirrors the debate going on at the County, where many are trying to levy other fees on non-profits. The way things roll in these arguments, it seems, is that those people philosophically in favor of a particular tax become convinced of its legality, whereas those people opposed on principle to it become convinced of its patent illegality. That includes the solicitors, on behalf of whomever they answer to. It's a standoff that's supremely annoying.

One thing's for sure: both the City of Pittsburgh and Allegheny County are so far behind the eight ball, they're going to need to find ways to milk money from the fiery engine which are our tax-exempt institutions in some way.

As it stands, none of the suggestions that have been floated are "legal" or "illegal" yet -- that's like trying to determine whether the child you have not yet conceived will grow up to prefer gin and tonics or scotch. The borderline, interpretive cases aren't legal or illegal until a judge makes it so.

So regardless of whether you'd like to tax college tuition, or hospital beds, or water usage, or square yards of real estate -- let's just debate those on the merits, select one or two, and go with it. Then a real life judge can finally tell us whether what we've attempted is kosher -- and if it's not we go back to the drawing board, and the Act 47 administrators will simply have to acknowledge we tried our best and cut us some slack.

Meanwhile, this crawling around in the legal dark isn't moving anything at all forward. Do let us try something.


Mayor Ravenstahl has been arguing that no prospective college student is going to notice this tax when deciding where to go to school, and few of them are going to feel its impact compared to what the colleges and universities are already charging them for various things.

He happens to be right.

This is going to upset students who are reading the newspaper this month and next month, but that's about all. If twenty of those transfer out of protest, it will be shocking. But it's not enough to dissuade people into choosing another school or change our favorable educational dynamic. I'm even not certain how prospective students will discover that Pittsburgh charges an educational privilege tax until they see it on their invoices.

In addition, I tire of hearing the argument, "You can't tax the thing that is succeeding best! You'll kill the goose laying our golden eggs!" Well, do these people prefer taxing those activities which are doing poorly? The ones exactly in the middle? The activities at which we excel with predictability are the preferable things to tax with care -- because they are strongest for whatever reason and there's more cream to skim.


There is still however a fairness argument to be made, and this is where I adore that it's called the "Fair Share" tax. I remember watching a Harold Hayes report on KDKA, in which he said that the "so-called Fair Share tax" would charge college students up to $400 bucks for utilizing Pittsburgh services eight months a year -- whereas the commuter tax charges workers a mere $52 for twelve months a year. It was crisp and devastating.

And by the way: plenty of non-matriculating adults get thoroughly wasted and trash Carson St., while lots of college students spend all night studying.

Meaning -- anything that impinges upon students alone without distributing the pain among our hospitals and medical centers is not "fair." That was the first tip-off that I wasn't going to like this tax proposal: they had to go and call it the "Fair Share". Kind of makes you wonder what they'll call their next tax proposal -- they already burned the most obvious Orwellian option.

Speaking of:

Pittsburgh mayor Luke Ravenstahl wants the entire City of Pittsburgh to wear University of Pittsburgh colors on Friday, November 13th in anticipation of Pitt’s football game against Notre Dame. (WPXI)

Chutzpah with a capital Ch! Well, the Mayor's last-minute attempt to transform a Steelers home game into a Let's Everybody Honor the Police event directly on the heels of the embarrassing night Oakland didn't exactly catch fire, so there's no reason to believe this stunt will wow anybody.


Which brings us to the decision at hand:

The mayor's plan, though not ideal, gives the city a way to reap revenue from the burgeoning educational enterprises that have grown up to replace its shrunken manufacturing base.

Unless someone has a better idea. (P-G Edit Board)

Exactly. Now make no mistake: this tax is not going be approved or rejected based on whether Councilors think it a fine idea. It's going to get settled on whether they can A) agree upon other revenue generators or cost savings to take its place literally on-time or B) how they feel this time around about forging ahead into that Great Unknown of not having a balanced budget either literally after the deadline, or after the Mayor starts banging the drums, blaming Council, and complaining that it's about to destroy the City.

That's why I think this thing is sure to pass -- unless a bunch of them agree to go the way of, say, water fee hikes. Which would distribute the pain across far more non-profits, and place the onus on them as to whether and how to pass on those charges to their many respective consumer bases. Which would be preferable.


That all having been said. Boy oh boy, wouldn't it be grand if one city official somewhere came forward with the proposal, "We can save half a million here." Or "We can cut half a million there." Just one. That would be stellar.

To be truthful, since we're agonizing over all these tax options, and the natives are growing restless, it might be the ideal occasion to for someone to gingerly broach the subject of bringing into the cruel 21st century our employee benefit plans as well -- but I don't want to give anyone a heart attack!


  1. Waiting for the post about Luke considering Dan Rooney for Time's Person of the Year.

  2. Eh, he had to throw out a local name for the local press. Isn't that something, though! Out of only six panelists, Time Magazine chooses our own fair mayor. Along with Mayor Rudy Giuliani. Which is ... notable, I bet they'll have fun with each other up there.

  3. As always, great post, Bram. I agree that the fair share tax will not have a material, if any, impact on enrollment in local schools. What bothers me is that it is very hard to enact a new tax but somewhat easier to increase an existing tax. So what happens down the road when more funds are needed? Do they simply increase it to 1.5%, then 2% and so on. This is the same reason I oppose a partial shift in property taxes rather than a complete elimination of them and replacment by another equal tax (sales and/or income). If the property tax decreases but is still there it will eventually be increased until we are essentially paying a new tax.

  4. Why not license lawn care providers and get them to pay something on what they are making?

  5. Legality is in the eye of the beholder, it seems. Personally, I still think real estate is the way to go - or at least start - with the non-profits. But that's just me.

    As to the Boy Mayor's plan to Turn It Blue, my initial thought is that the pronouncement must have been a trade-off for sideline passes and a photo with Charlie Weis at the game on Saturday.

  6. So, I think y'all would have to agree that the word "tax" is a loaded term, that there is a chance a judge or the State Legislature or whomever will decide Pittsburgh is not able to decide on its own to levy taxes. Further, there is, as you say (Bram), a fairness issue in dunning the (higher ed) schools alone, and perhaps in dunning students more than commuting workers.

    So rather than take a chance of being reversed by a judge or punished by a State Legislature (whom in particular because of our Act 47 status we want to stay on the good side of), here is my suggestion. Let’s charge students a fee, and rather than make it a percentage let’s make it (also) a flat $52. To make up for lost (anticipated) revenue and to address the fairness factor, lets levy a flat $1 a night fee on hospital bed occupants. And to address the final leg of possible fairness, lets charge UPMC and Highmark a $52 fee each year for each insurance policy they issue. The hospitals and in particular the insurance companies can afford these charges, and the reduction of the charge to students along with fees for the more prosperous not for profits would quell any charges of unfairness.

  7. If it's a "fair tax," why do CMU and Duquesne students have to pay more just because their tuition is higher? It should be a flat rate.

    And while I agree that it probably won't tip the decision of where one goes to college, it just seems sort of random. Like someone in the mayor's office threw a dart at a demographic map saying, "Who should we tax next?"

  8. "Who should we tax next?"

    That is easy. Tax the residents of the Pittsburgh who don't vote and don't pay anything for city services.

  9. There is nothing "fair" about this tax.

  10. pittsburgh should brew and sell it's own beer. Residents drink for free.

    Pittsburgh still makes its own water for public consumption, why not have a Pittsburgh Brewing Authority: purveyor of the finest pilsners and ales bureaucracy can construe.

    Six-Pack cartons will be bound by red tape...

  11. carpetbaggery is right. It should be like the occupation tax flat rate, although come to think of it that tax isn't fair to workers in the city of pittsburgh.

  12. Tax, surcharge, free, whatever you want to call it it’s not fair.

    One very important key that hasn't been covered. There are city residences who attend college who already pay their "fair share". Grad students, working students, etc all pay taxes on wages and real estate. Some, like myself, should not pay twice for city services, do I get double the police response, trash pickup, etc…fair should be fair. Maybe I am a very small majority, but I highly doubt all the students at CCAC, Kaplan and other training schools only come to the city for 8 months of the year.

  13. As you said Bram,-- the biggest issue should involve serious talk about government benefit levels. The idea that everyone must face the basic facts of reality-- one of which is that nothing is certain. Capitalism didn't invent floods, storms, diseases or any of the millions of ever changing things that make this so.

    I'm sure there are lots of self employed and small business folks who wish they had more stable incomes. They deal with it by -- eek saving, defering spending, investing and working more.

    No government pensions should have carried a guarantee of any kind. We all know how underfunded these things were, yet politicians and union bosses have done nothing about it. They just figured everyone would be long gone by the time things turned south.

    These funds need to be turned into 401k plans ASAP.

    "Then I say, the earth belongs to each of these generations during its course, fully and in its own right. The second generation receives it clear of the debts and incumbrances of the first, the third of the second, and so on. For if the first could charge it with a debt, then the earth would belong to the dead and not to the living generation. Then, no generation can contract debts greater than may be paid during the course of its own existence." -

    -Thomas Jefferson to James Madison,

    Much more to say.

    See just how insane the "Pittsburgh Promise" was? The mayor had more than enough of a clue as to the city's financial hole.

  14. I'm really not an expert on this government thing at least as it is today.

    It always seemed highly logical and just that commuters pay a tax and a pretty big one for the services they are consuming.

    However,the big issue of "taxation without representation" comes up. I know we can't always have that as in the case of sales taxes but generally representation should be the goal. Suburban commuters can rightly say they don't have a say in the city's spending policies and should't have to pay for them.

    It seems to me some kind of "fractional voting" would be fair. Say, non resident commuters had half a vote in city elections? (along with a larger tax)

    I know nothing like this has been done but is it absolutely illegal?

    I have more thoughts. My guess is that land policies that favor cars over residents and zoning laws are a key reasons for the city's structural insolvency.

    Ever read The High Cost Of Free Parking?

  15. John Morris - "Taxation without representation" was agitprop from the beginning -- reasonable agitprop, to be sure, since the colonists had no representation to speak of in Parliament. But folks in the burbs have a multitude of reps in PA Gov who provide the enabling legislation for how the state is run -- and by the way, pay sales tax and wage tax and everything else when they come into PGH, and don't get any "representation" in town. Besides which fractional voting is a major yuck.

    I'm not clear that the Pittsburgh Promise is digging us any holes ... the worst I've ever said about it is that it's diverting a lot of our charitable energies inefficiently.

    No haven't read that but that's about the 8,000th time its been recommended to me, I'll have to put it on reserve at the Carnegie Library.

    gREAT IDEA!!!!!!!!!!!!!!!!

  17. Amen on that old "Taxation Without Representation" canard, Bram.

    When I go to the beach for a week, I don't demand a fractional vote in New Jersey state, or Cape May local, government. I just pay the taxes and move on.

    We're taxed without representation our whole lives. The only way to avoid it is to never, ever leave the local municipality to which we pay taxes. Anyone willing to do that?

    Anyone? Anyone? Bueller?...

  18. "Then I say, the earth belongs to each of these generations during its course, fully and in its own right. The second generation receives it clear of the debts and incumbrances of the first, the third of the second, and so on. For if the first could charge it with a debt, then the earth would belong to the dead and not to the living generation. Then, no generation can contract debts greater than may be paid during the course of its own existence." -

    Any comment on this quote.

    The issue of taxation without representation for the living is one thing as has been stated the living can choose where to live work and shop (at least for now)

    What about Jefferson's quote about government debt?

    Make no mistake about this--unbacked pension promises represent debts placed on the current and future residents and business owners of Pittsburgh to a large degree by people who are now dead or politcians who are long gone.

    Moreover-- given the evasive and deceptive way these and other liabilities have been hidden brings makes them the product of possible fraud.Basically, it's a Ponzi scheme and should be treated, investigated and punished in the same way.

    As to the fractional voting thing, I stand by it. One's steady employment is generally a much longer and deeper relationship than occasional vacations and shopping sprees.

    Obviously, doing something like this could dramatically and quickly topple the cozy little clicks in city politics and change the playing field.

  19. I'm not running for office so I'll go all the way and burn more bridges.

    Why don't we talk about taking the city into Chapter 9 bankruptcy?

    Once it was considered unthinkable but it's startng to happen. I think by most measures we are in structuraly worse shape than a lot of places that have done this so far.

    It started with Vallejo, CA last year and Null Space gave it a lot of coverage.

    "For more on the situation in Vallejo, BusinessWeek had a recent report: Portrait of a Broke Town. What I have pointed out in the past is that as bad as Vallejo's situation is, from a purely fiscal perspective the state of Vallejo's city budget is nowhere near as bad as Pittsburgh's right now. Go figure."

    While I'm at it. What about prevailing wage laws? What effect do they have on our budget?

    This is thing about Luke. We need to see what all our cards are and deal with things in an honest way.

    (note: I am actually very bullish on the city's prospects if we can deal with our fiscal issues-- and the deeper cultural issues that brought us to this point)

  20. 1. Raise Luke's contribution rate to the City pension fund - it's about 4% (compare: police & fire: 6%, county: 6.5%)

    2. Tell Luke's finance gurus that it really isn't cheaper to pay firefighters OT than it is to hire new firefighters when you include firefighter OT in their pension calculation. Would you rather pay a firefighter 50% of $75,000 or $50,000 of $125,000 when he retires at age 50?

    From ICA: "Authority officials said the city really only needs to boost pension contributions by $10 million to comply with a recovery plan passed in June, and it could find that amount through pursuing known savings opportunities, like improving paramedic service billing, ending the outsourcing of payroll functions, collecting fines for fire code violations and making building inspection more efficient." Read more:

    Won't cure the problem, but small examples of opportunities lost on Luke and his 3rd string management team.