Pittsburgh residents who earn money from dividends, capital gains, rental properties or royalties could soon face a new 2% city tax, under legislation introduced by Councilmember Barb Warwick that immediately drew pointed questions from her colleagues about its legality and its reach into middle-class pocketbooks.
Warwick's bill, introduced in Pittsburgh City Council on Oct. 27, would tax net unearned income — things like capital gains, dividends, and income from rents, royalties, patents, copyrights, estates and trusts — at 2%, according to TribLIVE.com. As reported by Law360 Tax Authority, the legislation was introduced Tuesday and would apply a 2% tax on residents' net unearned income. Warwick's bill exempts retirement income, and she has said the tax would be paid by the city's top earners, framing it as a way to have wealthier Pittsburghers contribute more beyond what's collected from wages.
Warwick estimated the tax could generate $51 million annually, money she says is needed for a financially strapped city government. The pitch comes as Mayor Corey O'Connor's preliminary 2027 budget proposal, submitted to City Council on Sept. 30 according to the City of Pittsburgh, relies on nearly $27 million from city reserves to balance next year's books. That budget also reduces annual pension contributions by $10 million and cuts new funding for the Stop the Violence and Housing Opportunity funds, per the same TribLIVE report.
Who Would Actually Pay It
Backers of the proposal say its burden would fall overwhelmingly on the wealthy. Keystone Research Center figures cited by the TribLIVE report indicate the bottom 80% of Pittsburgh earners would pay an average of just $20 annually in unearned income taxes. Warwick has described the tax as aimed at high earners, and the proposal would exempt retirement income.
Those figures build on an earlier Keystone Research Center report from December 2023, which estimated a 1% tax on dividends, capital gains and interest would generate $22 million, and found that pairing a 2% rate on those categories with a 2% rate on net profits would increase city revenue by $52 million — a different scenario than the current proposal. That 2023 report projected the top fifth of earners would pay about 90% of the increased revenue, with the richest 1% paying over half. Keystone Research Center estimates the current bill could raise roughly $51 million.
Questions About the Proposal
The proposal raises questions about whether a new tax could deter investment, whether residents might move away, and whether it could withstand a court challenge.
Other questions center on whether the proposal could affect people who rely on investment income in retirement, whether middle-income earners could be swept in, and whether gains from selling a primary residence should be exempt.
Legal Questions Around the Bill
The legality question remains central. The proposal could face a legal challenge. The Pennsylvania Supreme Court's 2025 decision striking down Pittsburgh's facility usage fee on nonresidents under the state Constitution's Uniformity Clause addressed a different charge, not Warwick's proposed tax on residents, according to the Pennsylvania Supreme Court.
Pennsylvania's Local Tax Enabling Act authorizes second-class cities like Pittsburgh to levy taxes for general revenue on persons, transactions, occupations and other subjects within their limits, per the Pennsylvania General Assembly, though that provision alone doesn't settle whether this specific tax would hold up. Philadelphia collects a similar tax that supports its school district. Philadelphia-based municipal lawyer Richie Feder said at a Warwick press briefing that he believed the city could legally implement the tax.
Questions About Keystone's Role
Keystone Research Center has advocated for an unearned income tax. Jake Pawlak, a staff member there, previously served as Pittsburgh's Office of Management and Budget director under former Mayor Ed Gainey. Pawlak did not immediately respond to a request for comment Monday.
The bill's fate — and questions about its legal footing and its effect on middle-income residents — remain unresolved for now.
