Nonprofits coming up short on payroll tax

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Nonprofits -- which employ one of every four people working in the city of Pittsburgh -- don't pay the payroll tax. That puts the burden on private industry.

"Whether it's a four-person nail salon, six-employee software start-up, 30-person construction firm or 60-percent professional football team, the city is able to receive $550 in payroll preparation taxes for every $100,000 of city payroll," said Chuck Half, Mayor Luke Ravenstahl's innovation and performance manager.

That's just another piece of a long conversation. Allegheny County nonprofits are already under fire for not paying property taxes. Just last week, a health care consultant told members of County Council that 22 UPMC executives earn more than $1 million a year and the company maintains two corporate jets -- so maybe, just maybe, the county's largest employer and property owner is no longer a nonprofit in the traditional sense.

For his part, Mr. Half has been lobbying the city's various chambers of commerce to prod the big hospitals, insurance companies and universities to contribute more. (Big nonprofits in Boston do.) The argument goes something like this:

The city gets a lot more from real estate taxes ($130 million) than payroll taxes ($51 million), but the hospitals and universities skate on both. In theory, if you increased the number of workers covered by that payroll tax, you could drop the rate. Private employers might save some money. At the least, the burden would be more equitable.

Mr. Half points out that many local businesses, competing for talent, offer health insurance and tuition reimbursements. Nearly all that money is going to the city's hospitals, universities and insurance companies. Yet private firms also effectively cover for those institutions that don't kick in to keep the traffic lights on, the snow plowed (more or less) and the fire trucks running.

It ought to be noted that our booming nonprofits hardly represent a lose-lose situation for the Pittsburgh region. Upside includes more jobs, intellectual energy and continued free and reduced-cost hospital care for the poor. The universities and hospitals sponsor and provide volunteers for charitable events, and UPMC has been the primary funder of Pittsburgh Promise college scholarships for the city's public high school graduates. Not least, nonprofit employees spend plenty at stores and restaurants.

Yet the distance between the wealth in hospital and university executive offices and the situation on the ground seems to broaden daily. Times are tough, the state budget is tight and tuition has risen yet again, but last week the University of Pittsburgh trustees decided to tack increases of 3.3 to 15 percent on the six-figure salaries of Chancellor Mark Nordenberg and his top deputies.

This week, UPMC officials were blindsided when a seeming charitable gesture went awry: Some nonclinical staff have been involved in a union-organizing effort to get a livable wage, so it was probably a bad time for a supervisor to pull one of them aside with this news: She and other hospital employees were welcome to use a food bank set up by UPMC staffers.

Leslie Poston is a secretary at UPMC Presbyterian who has spoken at union-organizing meetings about having to use food bank donations to feed her family of four. She says she's not the only one in the workplace doing that, but believes her supervisor missed this key point: "We would like to purchase our own food."

In short, Ebenezer Scrooge got a much better reception when he told the Cratchits he'd spring for a Christmas goose.

I may have strayed from the initial point of tax fairness, but not from the idea that what seems fair to some Pittsburghers doesn't seem quite right to others. We've returned to the same puzzle: the biggest employers in the region, the engines of the regional economy, don't kick in the same way private employers do.

As I've mentioned before, all the nonprofits in this city put together currently contribute $3 million a year in annual "gifts" to the city that hosts them. In contrast, Brown and Boston University alone, with endowments that fall between Pitt's and Carnegie Mellon's, contribute $6.4 million and $5.7 million to their host cities.

From Bethlehem to Johnstown to Meadville to Pittsburgh, it's much the same story with different numbers. It's not clear that anyone in state government is listening, though, so don't expect the city to stop shaking the parking meters for more change anytime soon.


Brian O'Neill: or 412-263-1947.


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