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Pittsburgh council hears plan to tax unearned income as a way to raise $20M–$78M
Summary
Experts presented a ‘fair share’ proposal to tax select unearned income categories — interest, dividends, capital gains and similar items — that Keystone Research and ITEP estimate could raise roughly $20 million to $78 million depending on rate and scope. A municipal lawyer said council likely has legal authority; no legislation was introduced and no vote was taken.
Council members on Nov. 6 heard a proposal to expand Pittsburgh’s income tax base to include certain forms of unearned income as a way to raise predictable revenue for city services.
Diana Poulson, a senior policy analyst at the Keystone Research Center, told the council that taxing interest, dividends and capital gains at the city’s current earned‑income rate of 1% would generate roughly $20 million a year, and that broader inclusion of rents, royalties, patents, estates and trusts at 1% could raise about $27 million. She described alternative scenarios — taxing those categories at 2% or offsetting a small reduction in the wage tax — that the presenters modeled at higher revenue ranges, with estimates up to roughly $63 million–$78 million annually depending on the design choices and rate.
The proposal is explicitly limited in scope, Poulson said, and would not include retirement income, Social Security or unemployment benefits.
Legal counsel for the Keystone Research Center, Richie Fader, told the council his review of Pennsylvania law found no clear statutory barrier to a city ordinance taxing these categories. "The baseline rule is Pittsburgh can tax anything it wishes," he said, and he pointed to a provision in the state personal income tax law that preserves the validity of municipal ordinances addressing income. He said the Pennsylvania uniformity clause does not prohibit taxing unearned income differently from earned income because they are distinct categories.
Council members pressed presenters on collection and administrative feasibility. Finance Director Jen Gula cautioned that implementing a new tax type would require time, resources and likely new forms or system changes; she warned that local staff capacity and potential litigation are real considerations. "It’s not something that could happen for us overnight," she said.
Modeling presented to the council showed the additional burden would fall heavily on the highest earners: the top 1% of income earners would shoulder a large share of the new revenue, with the institute’s figures indicating that group could pay roughly half of the revenue from a narrowly drawn fair‑share tax.
No legislation was proposed during the post‑agenda session. Council members said the idea warranted further study but emphasized it would not be an immediate fix for the upcoming budget cycle. The mayor is scheduled to release a budget draft to council next week, and any new tax proposal would require additional analysis, administrative planning and public notice before formal consideration.
Next steps: councilmembers and staff said they will continue analysis of legal authority, administrative cost and revenue estimates should the council choose to pursue drafting an ordinance for future consideration.
