Wednesday, December 16, 2009

Tax on Tuition

Many city and municipal governments are struggling to balance budgets (most have balance budget requirements unlike the federal government) in the wake of this recession. Tax reveune is down and government spending is naturally high given that more citizens qualify for income assistance programs during tough economic times. The balance budget requirements of local governments handcuff cities into raising taxes and/or cutting government services at that absolute wrong time. Hence, many local and state governments are getting creative about how to raise taxes. As the state of PA contemplates legalizing table games, cities desperate for revenue are trying anything, like taxing college tuition.

Given that most schools get federal funds and students at the University of Pittsburgh, for example, receive over $4500 per student in funding from the state of Pennsylvania, it does show some ingenuity on the part of Pittsburgh city planners to try and siphon off federal and state funds back to the city's budget. But at what cost? The city is going to take a lot of heat from a potentially vocal constituency that often has a lot of time on its hands.

A more equitable tax on students might be to tax university endowments and the profits of the for-profit colleges and universities. The University of Pittsburgh has one of the nation's largest endowments for a public university (yet they still enjoy a significant taxpayer subsidy from PA residents). I'm sure Carnegie Mellon's endowment is considerable too. State owned universities and community colleges have little or no endowment and get a considerable amount of their funding from state taxpayers.

Also, just in principle, I would be bothered by the fact that my tax dollars that partly fund higher education across the state would be siphoned off by the city of Pittsburgh to pay for retired city employees.

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