David Rogers: Tuition tax a viable option for Bay State communities
University presidents across the country are likely breathing a little easier after learning that Pittsburgh Mayor Luke Ravenstahl asked his City Council to hold off voting on whether to impose a tuition tax on students attending the city’s institutes of higher learning.
Ravenstahl has been pushing the first-in-the-nation idea of a 1 percent tuition tax to pay pensions for retired city employees. It has been estimated the tax would raise $16 million annually. He also gave Pittsburgh schools the option of paying up to $5 million annually instead of incorporating the tax. But earlier this week, he sent a letter to the City Council informing it that more time was needed before any vote should be taken.
Watching the tuition tax debate with equal interest are mayors, governors and other municipal officials across the country who are looking for new ways to increase tax revenue to pay for basic services.
No doubt, many of the most watchful eyes live in Massachusetts where, according to the Metropolitan Area Planning Council, 53 percent of all municipal revenue comes from property tax, far above the national average of 28 percent.
With property values deteriorating over the last few years and a reduction of state aid, communities have had to slash budgets, lay off workers and raise tax rates just to make up the difference. Making it more difficult for officials in many Bay State communities is the percentage of property that cannot be taxed.
In Boston, Cambridge and Chelsea, $44 billion, a quarter of the total assessed property value, belongs to tax-exempt owners such as hospitals, museums and universities, according to the MAPC. In lieu of their tax-exempt status, universities have agreed to contribute an agreed-upon amount to their landlords.
Cambridge in 2005 signed an agreement with Harvard University where the school would pay as much as $60 million over 20 years, or about $3 million a year. Considering Harvard’s endowment was more than $30 billion at the time, the agreement proved unsatisfactory to many.
Across the river, Boston Mayor Thomas Menino appointed a nine-member task force in January of this year to look into the possibility of changing Boston’s agreement with his city’s universities. Around the same time, City Councilor Michael Flaherty, who later ran an unsuccessful campaign to succeed Menino, called for the end of the tax-exempt status of universities and museums across the state.
Thanks to the shrinking endowments of universities across the state, both endeavors haven’t gained much traction. It was, however, touched upon during an October debate between the two.
Despite the recent hit Harvard and others have taken on their endowments, universities should be contributing more to the communities they reside in. At a time when basic municipal services are being taxed to their near-breaking points, it is more than fair that Boston, Cambridge and other communities press universities to pay more for the privilege of being tax exempt.
If they demure, then raising the specter of a tuition tax on its students would be in the best interest of taxpayers. Unfortunately, Menino has already shown his hand making it clear that his office isn’t even going to consider the tax option. That’s too bad. At the very least, he should have kept his thoughts to himself and at least give the impression that he might levy a tuition tax. Just the threat of a tuition tax will give communities more leverage to better their bargaining position with universities.
So far, it sure has worked in Pittsburgh.
David Rogers is an editor with GateHouse Media New England. Any comments? Send them to: email@example.com