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PG Benchmarks
PG Benchmarks: Behind the numbers

Sunday, November 24, 2002

To arrive at his final conclusions comparing the 15 PG Benchmarks cities, Carnegie Mellon Professor Epple and CMU doctoral student Lee estimated all the tax payments Pittsburghers made to city, state, county and school district coffers in 1998-99.

The data, from a 2001 U.S. Census Bureau government finance report, is the most recent information available. The only taxes not counted in their study are federal taxes and any special district taxes, such as the 1 percent sales tax charged by the Regional Asset District, which helps pay for the budgets of museums, arts groups and cultural institutions around town.

Due to the imperfect geographic overlap of cities and counties, Epple made several calculated adjustments to apportion the amount of county, school district and state taxes paid by city residents on a per person basis.

In doing so, he asked that the Post-Gazette not draw conclusions from the per capita tax figure alone, since some cities such as Seattle are wealthier and thus better able to absorb high taxes. Poorer cities, such as Cleveland, have a lower amount of taxes per capita, but lack the same income. Thus Cleveland's burden rises when you consider taxes as a percentage of income.

The tax comparison data does not account for the recent countywide reassessment, which could raise Pittsburgh's comparative burden even higher, nor does it evaluate any disparities between the taxes paid by people vs. the taxes paid by businesses.

But Epple and Lee do include business taxes in their total, which would imply that the burden for higher taxes on business is ultimately shouldered by local residents. Many economists believe that, if business taxes are high enough to dissuade companies from locating in a city, consumers "pay" for that dearth of industry in the form of lower wages and lower property values. Epple believes this argument is valid, but acknowledges that some business taxes may nonetheless be paid by business owners who live outside the city. However, unless some of the 15 Benchmark cities are better able to shift business taxes to out-of-town owners, the relative rankings provided in the study would not be affected.

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