If you live in Pittsburgh, you’ve no doubt heard that the city is laying off over 700 employees because of a massive budget shortfall. Pittsburgh’s financial situation has been pretty grim for years now, but things are finally starting to bottom out. So who is going to suffer the most? The average taxpayer. We lose police officers, swimming pools, rec centers, and will more and likely have to start paying for services like garbage collection. To me, this is a bit stunning, since I already pay more in income taxes to the city than I do to the state, and an occupation tax just to have the opportunity to work in the city.

So what got us here? Simple. For many years, the city’s population has been declining as more and more younger people leave town after high school or university. Pittsburgh also has the stigma of being a manufacturing town, and many businesses aren’t interesting in opening up shop here. So, Mayor Murphy had a plan. In an effort to woo more businesses to Pittsburgh (and keep the existing ones), the city offered to not require new businesses to pay business taxes. The thought was that even though the businesses wouldn’t be paying taxes, they would bring so many new jobs to the city that the shortfall would be made up in property taxes. This logic, of course, ignored one very visible trend — people were flocking to the suburbs, and therefore not paying income taxes to the city.

In reality, this means that roughly 45% of the businesses in the city don’t pay business taxes to the city. Many of these are large businesses, who could generate quite a bit of revenue for the city via the taxes. But instead, it’s mostly smaller businesses shouldering the tax burden, and now, that burden is also being passed along to the average taxpayer. On top of this, Mayor Murphy decides to talk out of both side of his mouth, lamenting that things have happened this way. Right. The biggest cheerleader for these large business exemptions is the mayor himself.

So, am I saying the layoffs were unnecessary? Well, without them, those people probably would not have been paid. So, for the mayor and city council, it was most expedient decision. But they need to face up to the mistakes that they’ve made in the past with the city finances. City council should not have approved budgets knowing they couldn’t be balanced. And the mayor can’t give away the keys to the city to every business that threatens to leave.

Posted on 11 August 2003