New Jersey residents pay the highest state and local taxes in the nation, notes the New Jersey Taxpayers’ Association (NJTA). And what do they get for all that money? For most New Jerseyites, not much more than residents of other states, but for government employees, the benefits are great, according to a NJTA analysis of the state’s public employee compensation.
For example, a police officer who retires with a $105,000 salary after 25 years of service can end up making more in retirement, after 29 years, than he or she did while working.
But that’s not all. Public employee pensions are a ticking time bomb that could bring fiscal catastrophe to the state.
New Jersey’s public employee pensions are under funded by billions of dollars which means there is going to be huge political pressure applied by Public Employees and Retirees to yet again increase taxes on the residents of New Jersey. However, that will simply be a stall tactic. The math will not work over the long term. There are too many employees and retirees in the current pension plans, the benefits are too generous, and there are too few tax payers with enough income to support these pensions. The New Jersey Pension Plans are under funded by roughly $50 billion (some studies and assumptions put the real liability at substantially higher levels). Therefore, on average, every NJ taxpayer will be required to pay more than $20,000to continue these pension benefits in addition to current tax rates. For each day that passes in which these plans are not modified, that tax burden will grow.
New Jersey, California, and Michigan may be egregious cases, but there’s no reason to believe that this situation could not repeat itself in even more states.
For more on public sector unions, see here.
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And why do you think the pensions were under funded? Because the politicians did not have the intestinal fortitude nor the integrity to raise taxes to meet funding requirements. In effect, New Jersey has enjoyed lower taxes as a result of robbing the pension system. And usually the examples cited to critique pension payouts are focused on an inevitably egregious but statistically low minority of pension holders. Most public employees work for relatively low wages throughout the majority of their career in performing public service. They chose to do so not in the hopes of getting rich but obtaining a secure retirement. Those who chose the so-called free market for their careers decided to gamble with making more money and took their chances with retirement security. Let’s not scapegoat or blame the public employee when the free market doesn’t work properly or rather works the way it always has which is Darwinian survival with no regard for the individual good.
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