Elmer Smith: You don't need to go to college to know this is a bad tax idea

YOU HAVE to dig deep into the archives of really bad tax ideas to top this one.

Pittsburgh Mayor Luke Ravenstahl, casting about for something that hasn't been taxed yet, has come up with the idea of taxing college tuitions.

His honor has proposed a 1 percent tax on tuitions paid by the 100,000 students at Pittsburgh's five universities. The estimated $16.2 million in revenue is already being built into his 2010 municipal budget.

Fits nicely too. The city has a $15 million budget gap to fill and a huge deficit in its pension fund to cover. This tuition tax would go a long way toward sopping up some of that red ink rising up around its ankles.

Not surprisingly, students at Pittsburgh's five universities aren't nearly as keen on the idea as is Ravenstahl. Expect to see stuffed figures that look a lot like him hanging around campus sometime soon.

But bad ideas can spread like viruses in the kind of economic climate Pittsburgh and Philadelphia find themselves in. In Providence, R.I., the city is seeking state approval for a levy amounting to $300 per student per year.

Philadelphia has even more campuses and students to tax than Providence or Pittsburgh and a $31 million budget gap that is twice the size of Pittsburgh's.

When you consider that about 25 percent of the city's property, including all of its colleges, is exempt from property taxes, it wouldn't take a lot to get overburdened Philadelphians interested in taking a tax bite from campuses that their kids don't go to anyway.

The city used to collect about $2 million a year in payments in lieu of taxes from nonprofits, half of it from the University of Pennsylvania alone. If their properties weren't exempt, the city could collect 10 times that much at the current tax rate.

Taxing students who are going to leave here after graduation on the first thing smoking is appealing.

"Its appeal is that it's an easy tax to impose and collect," said Terry Hartle, of the American Council on Education. "It's simple and convenient.

"But it's unfair because it is imposed on people who don't vote in local elections and don't get a say.

"Cities shouldn't do anything that discourages people from taking up post-secondary education. It makes a city less attractive."

But Pittsburgh could start a trend if it passes the tuition levy.

If so, it won't spread to Philadelphia, at least for now.

Taxing tuition, "is not even on our radar screen," City Budget Director Steve Agostini told me yesterday.

"You have to wonder at what point it becomes a disincentive to go to school here. I don't know.

"All cities have to consider a whole range of things they would not have considered before. There's a limit to how much you can reduce services.

"We talked about this in Madison, Wisconsin. But the state paid the city a fee for the impact that state government and the university [of Wisconsin] had on the city.

"We would have to think long and hard before we went forward with something like this."

That's for now. But don't be shocked if it turns up on our tax agenda soon.

"There's an old saying in tax policy," Hartle said: "'Don't tax me; don't tax thee. Tax the fellow behind the tree.

"I guess that goes for the fellow behind the ivy walls too."

Send e-mail to smithel@phillynews.com or call 215-854-2512. For recent columns: http://go.philly.com/smith.