The Hoboken Tax Reform Coalition
The coming Union Tax
http://blog.nj.com/njv_johnbury/2010/02/bipartisanship_is_the_probl...
According to the above link the NJ Pension program only has 68 Billion in the kitty, is paying out 7 billion a year, and will be completely out of money within 8 years. Within 4 years yearly pension payouts are expected to go from 7 Billion to 15 billion. The article suggests the estimated 7 Billion per year pension contribution Gov. Christie mentioned in Thursday's budget speech is actually low and it would take 10+ billion in new taxes per year to keep the system a float today.
To put this in persepctive this fiscal year the state income tax was projected to bring in 11.2 Billion, the sales tax 8 Billion, and corporate and bank taxes another 2 billion. There are other taxes but these are the largest three.
The 10 Billion Union Tax could be raised by doubling either the Income Tax or by doubling both the Sales tax and Bank / Corporate tax. When Pension payouts hit 15 Billion i four years the Union tax would almost certainly have to go up.
Let me be blunt,I am angry. I'm angry at the politicians for making these deals, I'm angry that they weren't honest about the true costs of the contracts, I'm angry at union leaders who didn't ask how the state was going to hold up its end 10, 20, and 30 years out. Didn't they have cost projections? Didn't they ask for them?
My gut is that both Politicos and Union leaders didn't care about long term sustainability that was a problem for future Politicos and future Union Leaders to work out and the leaders of years past wanted their free lunch. We'll that future is now and we have to deal with this mess.
Tax payers and union members are in this, maybe not together but we are all in this. Now the question is do we fight each other or work together on a way out of this mess. If we work together we have to do what wasn't done in years past and that's be honest with each other, about the costs and what is possible.
According to the above link the NJ Pension program only has 68 Billion in the kitty, is paying out 7 billion a year, and will be completely out of money within 8 years. Within 4 years yearly pension payouts are expected to go from 7 Billion to 15 billion. The article suggests the estimated 7 Billion per year pension contribution Gov. Christie mentioned in Thursday's budget speech is actually low and it would take 10+ billion in new taxes per year to keep the system a float today.
To put this in persepctive this fiscal year the state income tax was projected to bring in 11.2 Billion, the sales tax 8 Billion, and corporate and bank taxes another 2 billion. There are other taxes but these are the largest three.
The 10 Billion Union Tax could be raised by doubling either the Income Tax or by doubling both the Sales tax and Bank / Corporate tax. When Pension payouts hit 15 Billion i four years the Union tax would almost certainly have to go up.
Let me be blunt,I am angry. I'm angry at the politicians for making these deals, I'm angry that they weren't honest about the true costs of the contracts, I'm angry at union leaders who didn't ask how the state was going to hold up its end 10, 20, and 30 years out. Didn't they have cost projections? Didn't they ask for them?
My gut is that both Politicos and Union leaders didn't care about long term sustainability that was a problem for future Politicos and future Union Leaders to work out and the leaders of years past wanted their free lunch. We'll that future is now and we have to deal with this mess.
Tax payers and union members are in this, maybe not together but we are all in this. Now the question is do we fight each other or work together on a way out of this mess. If we work together we have to do what wasn't done in years past and that's be honest with each other, about the costs and what is possible.
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Replies to This Discussion
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Permalink Reply by Jack Dawkins on -
Interesting, FAP - that you don't talk about the other HUGE culprit in the biggest transfer of wealth we've seen, certainly, in my life time. What about the hedge fund, CDO, ABS crooks? Sure, I'm angry too that this is going to fall squarely on the shoulders of the tax payers, on the rank and file, or both. But, who is walking away unscathed with MILLIONS of our tax payer dollars? That's where anger (and action) should be directed. Clawbacks is the way to go here.
Wringing our hands and lamenting about how we're out of money so the pensioners won't be able to get their pensions -
Turning the private sector worker against the organized worker -
Forcing the private sector to pay for the funding of pensions that they themselves gave up long ago (with the promise that they would get more money from a DC plan...ha ha.) -
Brilliant - and you FAP - you're right there - being angry, pounding your fist, but saying - "hey, too bad - these workers have to forego their pensions, hey, the rest of us (non-union) don't get pensions - so unionized workers can't get them either and I sure ain't gonna pay for them.
How about some full disclosure, Fap....I'm curious do you work for a hedge fund? Did you?
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Permalink Reply by Kathy L. Mallow on
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JD makes a compelling point.
How about the obscene bonuses instead funelled into the pension funds that hedge fund mgrs., et al, squandered/plundered, whatever action-verb-?
A balance needs to be found.
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Permalink Reply by David on
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Kathy / Jack I'd say its a distraction to be talking about bankers. Its like the plumbing springing a leak, then complaining about the termites. They both need fixing but have little to do with each other.
If I can re-shape FAPs point, pensions are a typical front loaded bad government deal. We (NJ and NJ municipalities) can't do business like this anymore. If you look at his numbers, we can't afford the contracts NJ has made in the very near future. So the question is what are we going to do? Here is what I expect.
Step 1) Cut back on spending and employment, Christie is already doing some of this, scary as it is more will be needed
Step 2) Move immediately to a defined contribution plan or pension/DC hybrid for any employees without an existing locked down contract
Step 3) New taxes. Sorry, probably sin taxes on gas/cigarettes/liquor, higher tolls, maybe more property taxes. And yes the government may put some sort of sneaky back door tax to get back some of the pension money ( The federal govt is doing something similar to the banks)
or
the state government is paralyzed and does nothing, debt increases until it can't any longer, with dramatic and terrible effects, maybe no one gets a pension.
Further while the future is unknown, actuarial and other professionals get paid to make reasonable predictions, and we aren't close. Many of these current deals were likely done in bad faith or by short-sighted people, simply hoping against reality. The time to investigate what went wrong will be soon, and will need a change in the rules how the unions and government operate, similarly to how rules are changing for the financial firms.
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Permalink Reply by Kathy L. Mallow on
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.Nice try, David. It's beyond time for consequences for bad behaviors. The behaviors of pension fund managers, to start. It's not about plumbing analogies. It's about who really should pay the piper. (bad plumbing pun intended)
David said:Kathy / Jack I'd say its a distraction to be talking about bankers. Its like the plumbing springing a leak, then complaining about the termites. They both need fixing but have little to do with each other.
If I can re-shape FAPs point, pensions are a typical front loaded bad government deal. We (NJ and NJ municipalities) can't do business like this anymore. If you look at his numbers, we can't afford the contracts NJ has made in the very near future. So the question is what are we going to do? Here is what I expect.
Step 1) Cut back on spending and employment, Christie is already doing some of this, scary as it is more will be needed
Step 2) Move immediately to a defined contribution plan or pension/DC hybrid for any employees without an existing locked down contract
Step 3) New taxes. Sorry, probably sin taxes on gas/cigarettes/liquor, higher tolls, maybe more property taxes. And yes the government may put some sort of sneaky back door tax to get back some of the pension money ( The federal govt is doing something similar to the banks)
or
the state government is paralyzed and does nothing, debt increases until it can't any longer, with dramatic and terrible effects, maybe no one gets a pension.
Further while the future is unknown, actuarial and other professionals get paid to make reasonable predictions, and we aren't close. Many of these current deals were likely done in bad faith or by short-sighted people, simply hoping against reality. The time to investigate what went wrong will be soon, and will need a change in the rules how the unions and government operate, similarly to how rules are changing for the financial firms.
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Permalink Reply by David on
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Ack, I thought it was a good analogy! : )
My point was everything in its place. The financial issue is a national issue not a local tax issue. I am at a loss how something done at the NJ/Hoboken level will affect the finance world.
State and municipal pension issues; these are things you can hope to affect. The pension issue is a NJ and Hoboken problem unless you plan to leave the state fairly soon.
So do you want action on the state finances? Do you want to hope the finances fix themselves? Do you doubt the numbers? What direction should action take?
Kathy L. Mallow said:.Nice try, David. It's beyond time for consequences for bad behaviors. The behaviors of pension fund managers, to start. It's not about plumbing analogies. It's about who really should pay the piper. (bad plumbing pun intended)
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Permalink Reply by Gene on
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Unfortunately NJ is going to be hurt severely. Residents are leaving in droves. Figures show that the people leaving are the higher wage earners and tax payers.
The old saying is; "You cannot get money out of a stone". Our new Governor has taken a rightful and tough stand against NJ's debt.
The politicos spend OUR money to stay elected and the union leaders take whatever they can get to keep their jobs. NJ has been going downhill for the last 10 years and this is not something that can be cured overnight.
Taxes have to be cut and cut again by the State, the Counties and the Cities. Government creates nothing; it just takes and spends and then does the same over and over.
Nothing will be done by any of these entities unless and until a leader takes the action as our new Governor bravely did today.
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Permalink Reply by Kathy L. Mallow on
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Yes well, Gene. It's not necessarily about lowering taxes, it's about holding the people responsible for this disaster accountable. At all levels. From your various posts on this site, I imagine we may not agree about who's responsible or what's the best approach. But we'd surely agree that NJ is a financial disaster.
David, your points are well taken. And yes, I am very soon leaving the state.
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Permalink Reply by Kathy L. Mallow on
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Folks might want to take a listen to NPR's All Things Considered, this a.m. Archived. Interesting piece about NJ's pension funds' accounting practices "Smoothing," the creative accounting technique described. NJ's apparently not the only state employing this technique.
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