News & Events

Murphy considers college, hospital payroll tax (MS)

By John C. Drake Globe Staff / May 15, 2009

Frustrated by slow progress in convincing tax-exempt colleges and hospitals to make voluntary payments to the city, a Boston city councilor is considering a more aggressive tack: a payroll tax.

Councilor at Large Stephen J. Murphy said yesterday he is researching whether the city can single out educational and medical institutions for a tax on their employees’ wages.

"They keep talking about how much they generate for the economy and that the state gets the sales and the income tax," said Murphy, who is a member of a city task force researching the city’s policy on collecting payments in lieu of taxes from nonprofits. "I said maybe we should look at developing a payroll tax."

Murphy is a former chairman of the council’s Ways and Means Committee who has consistently leaned on the city’s colleges and universities to pay more. He is also a member of a task force established by Mayor Thomas M. Menino to explore options for increasing voluntary payments to the city by tax-exempt institutions. He said it was too early to say whether he would propose collecting the tax through payroll deduction or from the institutions themselves. as a percentage of their total payroll.

Colin Riley, a spokesman for Boston University, declined to respond to Murphy’s idea, saying the task force’s work is ongoing. A Harvard University spokesman could not be reached. A spokesman for the Conference of Boston Teaching Hospitals, which represents the city’s largest academic medical centers, could also not be reached.

Dot Joyce, Menino’s spokeswoman, said the mayor was opposed to putting fresh financial burdens on workers at those institutions. "We have to remember that it’s not just doctors who work in hospitals and not just professors who work in universities, but all different types of employees, many of whom make just above minimum wage," she said. "We are not trying to harm those employees during this difficult economic downturn."

Massachusetts Taxpayers Foundation president Michael J. Widmer said that the state constitution prohibits local income taxes and that a proposed constitutional amendment that would have allowed them was rejected by voters in the 1990s. New York City imposes an income tax on workers in the city that ranges from 2.9 percent to 3.6 percent, depending on income. Philadelphia imposes a wage tax of 3.5 percent to 4 percent on city residents and noncity residents who work in the city.

Widmer called it "a classically bad idea" to target medical and educational institutions. "The state and cities and towns are desperate for revenue, so I’m not surprised by any tax proposal," he said. "But I am surprised that it’s targeting the economic engines of the city and the state."

A report issued last month by the mayor’s office said that colleges and hospitals in the city would have owed $345 million in property taxes in 2009 if they did not have tax-exempt status. Instead, the city was set to receive $14.5 million under voluntary commitments for payments in lieu of taxes.

BU, which has the most tax-exempt property in the city, paid the most at $4.9 million, which is about 9 percent of what it would owe if its $2.1 billion worth of property in the city was taxable. It is followed by Harvard, which paid $2 million. The Cambridge institution’s Boston property is worth about $1.5 billion, city records show.

In an example of the wide differences in what institutions are willing to pay, Northeastern University paid just $30,571, less than 1 percent of the taxes it would otherwise owe on its $1.3 billion in property in the city. Emanuel, Wheelock, and Fisher Colleges make no payments to the city, according to the report.

John C. Drake can be reached at