Pittsburghers might have to pay the price for Act 47

If things continue as planned, everyone earning paychecks in Pittsburgh will pay an extra… If things continue as planned, everyone earning paychecks in Pittsburgh will pay an extra $135 next year.

City Council has proposed a measure that would raise the city’s occupational privilege tax from $10 each year to $145.

“There’s no such thing as a free lunch in this country,” Councilor Doug Shields said. “If we don’t increase the occupational privilege tax, residents will see a rise in property taxes. And no one wants to see that — not the mayor, council or anyone else.”

The proposal comes in the wake of the city qualifying for distressed status under Act 47. As a result, various projects were halted, services considered to be amenities were cut, and city employees and civil servants were laid off. While the city has tried to return as much as possible to residents of the city, council is faced with a choice — raise the occupational privilege tax or raise property taxes.

“The great thing about Pittsburgh is that we have a very stable employment base,” Shields said. “We have over 300,000 people working in the city.”

According to Councilor Sala Udin, most of those workers aren’t residents of the city.

“The majority of our workers, about 66 percent, live outside the city,” Udin said.

That 66 percent of workers, approximately 198,000 employees, don’t pay property taxes to the city. The city obtains most of the money it uses for funding from property taxes, and consequently, council feels it is losing money.

“We have over 100,000 employees working for non-profit organizations, plus all of the commuters,” Shields said. “We don’t get anything for them. By raising this occupational tax, we’ll be getting something for [the large volume of workers].”

Udin agrees that it is necessary to obtain something from commuters.

“All of these people work in the city,” he said. “The city has to pay a large amount of money for street work, police, fire, emergency workers, public service and garbage. We’re just modernizing the tax.”

The current occupational privilege tax was begun in 1964 and has not changed since, despite the increase in the cost of running the city’s government. Compared to other cities Pittsburgh’s size, the current occupational tax is low. According to Udin, residents of Philadelphia pay 4.8 percent of their salary in occupational privilege taxes. Cleveland residents pay approximately $1,000 each year for the same tax, while Pittsburgh residents pay $10.

Pennsylvania government regulates that municipalities only charge $10 per year for the occupational privilege tax, but that can be changed if a municipality’s government approaches legislature with reasons to increase the tax.

Pittsburgh City Council has plans to do just that in the fall. Shields said a three-week period is planned for this fall, when state legislature will look at Pittsburgh tax reform. If the increase is approved, employees will be subject to the tax beginning Jan. 1.

But Udin said students will not have to pay the entire $145 if they do not work year-round.

“Under this new structure, the tax will be prorated,” he said. “For instance, if a student only works two months of the year, then they will only pay two-twelfths of the $145.”

And no one must pay the tax more than once, so it’s important for students with multiple jobs to tell their employers if they’ve already had the tax taken out of another paycheck.

Students can also avoid the taxation by having another job outside city limits. According to state law, employees are only required to pay occupational privilege tax in one municipality.