I would like to know why so many companies and hospitals don't pay their fair share of taxes to Pittsburgh. The taxpayers are burdened enough. | You Had to Ask | Pittsburgh | Pittsburgh City Paper

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I would like to know why so many companies and hospitals don't pay their fair share of taxes to Pittsburgh. The taxpayers are burdened enough.

Question submitted by: Rose Marie Goyak, Millvale

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You're from Millvale, eh? That means you're a...suburbanite. And according to Mayor Tom Murphy, that makes you part of the problem! You Millvale residents with your wanton, reckless lifestyles, tearing up our streets with your high-powered sports cars, expecting police protection as you walk from one ritzy non-profit gala to the next in dazzling jewelry and the latest Paris fashions...all the while expecting us hard-working city folk to make due with a few crumbs in amusement tax.

But you're right: High-stepping residents of Millvale aren't the only ones getting over easy when it comes to paying for city services. As the mayor is fond of reminding us, 30 percent of the city's land is owned by tax-exempt organizations -- either non-profit institutions or government agencies. Of the city's two-dozen largest employers, all but seven are tax-exempt, and the city's principle corporate tax, the business privilege tax, is full of loopholes and exemptions.

All in all, Murphy makes a strong case that many landowners and employers pay too little in taxes. Who's to blame? Well, other than the residents of Millvale, the answer is: Harrisburg legislators, the courts, and Tom Murphy himself.

As a rule, non-profits are exempt from property and other taxes because they are warm and fuzzy and nice. They don't do mean corporate things like buy up their competitors and shut them down or pay their executives huge sums of money. Unless you're talking about UPMC, which does do those things but remains tax-exempt because anyone who objects is beaten up by UPMC male nurses and then denied anesthetic.

Anyway, for a time the city had some luck dunning these non-profits for "Payments in Lieu of Taxes" -- fees to cover the cost of services provided by the city. According to City Controller Tom Flaherty, the city took in $3.5 million from non-profits a decade ago. But even then, the system was flawed: Payments were determined on an ad hoc basis, and the city's principle leverage was a threat to challenge the non-profit status of a group or a particular land use if it didn't cough up some cash.

But the city lost that leverage in 1997, when the state Legislature passed a law making it harder to challenge a non-profit's tax-exempt status. Since then, non-profit revenue has dwindled to about a half-million dollars. At a Sept. 4 press conference, Flaherty recommended that the city prevent non-profits from expanding at the city's expense: "Tax-exempt institutions cannot expand further...until we get tax relief," Flaherty said. "If the city of Pittsburgh allows that, they are guilty of misfeasance."

But if expanding tax-exempt property is proof of misfeasance, city leaders should have been locked up long ago. After all, the single greatest expansion of tax-exempt property in recent years was Plan B, the construction of Pittsburgh's new stadiums and convention center. We spent millions of dollars in tax money just to build structures that, because they are government-owned, are tax-exempt themselves.

Smart, eh?

Loopholes in the business privilege tax, meanwhile, are as old as the tax itself. From the tax's creation in the 1960s, manufacturers were exempted to protect the city's industrial base. Over the years, many other companies tried to wrangle exemptions for themselves too. Banks and insurance companies sued the city and got a court to recognize that, because they were businesses subject to state regulation, they shouldn't have to pay local taxes. (Of course, you and I are subject to state regulation as well -- just try driving naked at 150 miles an hour down I-79 if you don't believe me -- but somehow, this doesn't translate into a tax break for us.)

Newspapers like this one don't pay the tax, because courts have ruled they were manufacturers too. But TV and radio stations -- including the two FM stations owned by City Paper's parent company -- do pay the tax since they don't make anything. At our company, of course, we exempt employees spend the extra money buying rounds for our non-exempt co-workers -- largely to keep some of the scarier DJs here from hurting us.

Just as he has with tax-exempt property, Mayor Murphy has made a bad situation worse. When financial services giant Federated Investors started grumbling about the local tax burden in 1996, Murphy got Harrisburg to pass a bill in the wee hours of the night to exempt financial service companies from the tax too. When City Council complained, Murphy charged they had a "basic ignorance of business." Murphy's actions sound strange now, given his whining about how few businesses are paying taxes, but the move was consistent with his 1990s development strategy: Offer tax incentives to lure businesses to stay here -- even if that means you have less tax money to pay for services those businesses require.

Today, of course, Mr. Business Savvy is trying to get Harrisburg to pass another bill in the wee hours of the night -- this time to enact widespread taxes that don't have the loopholes he once fought for.

Really, it's no wonder all our young people are fleeing to Millvale.

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