Trump’s SALT Cap Fuels a Wealth Exodus from High-Tax States
- Thread starter dealmaker
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Many of the localities with pension shortfalls either borrowed against them (and never paid it back) or diverted contributions over the years for politically favorable projects. You can't trust politicians with a pot of money sitting in front of them that won't be paid until they are out of office.
The Feds are a great example of what basic pension mgmt can achieve when the rules are followed and no one dips into the kitty. They had generous pensions under the old system and a decent one under the new (FERS) system. The trust fund was never raided by Congress (unlike SS) and continues to exist today. In 1990, the balance available was $238B. After meeting all of their generous obligations and investing in little more than 10Y and 30Y Treasury bonds, the balance as of 2016 is a tad under $900B and projected to exceed $1T in 2020. That trillion dollars of cash invested in a (normalized) 10Y note at 3% generates $30B a year in interest alone - covering more than 30% of the annual obligations. That's the original premise and value of a pension fund, not some ledger entry holding the place where the money was borrowed with a fictitious projected rate of return going forward.
Of course the people in those municipalities that raided the kitties are long gone and all of that was forgotten - as they knew would happen. No one sits around today talking about how that councilman in Detroit made the call to short the contribution in March of '78. All we talk about is what it looks like today. Learning has not occurred.
One other note about firefighters making huge money. A number of municipalities have studied this and concluded that it is cheaper to pay one firefighter overtime than to hire additional firefighters. This results in some younger guys that work every possible hour making salaries that grab headlines and sending kids scurrying for applications. The primary element in the equation is the benefits package overlay. If an employee makes $80K a year, the cost to the county may be $125K once you factor HB matches, 401K matches, pension contributions, sick leave etc... If one guy works tons of hours they are paying one overlay vs. four or five overlays. Secondarily, his tax rate is higher and more of the excess funds are returned to the municipality. It also prevents overhiring and the need for layoffs if the additional hours are not needed in subsequent years (severence, unemployment payments, etc...)
The Feds are a great example of what basic pension mgmt can achieve when the rules are followed and no one dips into the kitty. They had generous pensions under the old system and a decent one under the new (FERS) system. The trust fund was never raided by Congress (unlike SS) and continues to exist today. In 1990, the balance available was $238B. After meeting all of their generous obligations and investing in little more than 10Y and 30Y Treasury bonds, the balance as of 2016 is a tad under $900B and projected to exceed $1T in 2020. That trillion dollars of cash invested in a (normalized) 10Y note at 3% generates $30B a year in interest alone - covering more than 30% of the annual obligations. That's the original premise and value of a pension fund, not some ledger entry holding the place where the money was borrowed with a fictitious projected rate of return going forward.
Of course the people in those municipalities that raided the kitties are long gone and all of that was forgotten - as they knew would happen. No one sits around today talking about how that councilman in Detroit made the call to short the contribution in March of '78. All we talk about is what it looks like today. Learning has not occurred.
One other note about firefighters making huge money. A number of municipalities have studied this and concluded that it is cheaper to pay one firefighter overtime than to hire additional firefighters. This results in some younger guys that work every possible hour making salaries that grab headlines and sending kids scurrying for applications. The primary element in the equation is the benefits package overlay. If an employee makes $80K a year, the cost to the county may be $125K once you factor HB matches, 401K matches, pension contributions, sick leave etc... If one guy works tons of hours they are paying one overlay vs. four or five overlays. Secondarily, his tax rate is higher and more of the excess funds are returned to the municipality. It also prevents overhiring and the need for layoffs if the additional hours are not needed in subsequent years (severence, unemployment payments, etc...)
Agree on your points. However, the county only recollects the excess funds via taxes if the state and/or county have an income tax. In Alaska, there is no state (and I assume county) income tax. Although it's probably likely the would recoup some of that money through sales, property, and maybe car registration tax on the assumption that the employee would tend to spend more. But it's probably not a lot.
I also forgot to mention the fact that many big cities tend to waste a lot of money on projects that smaller cities simply cannot afford to do. For example, in my hometown of Portland, billions have been spent on a light rail projects that less than 5% of the population actually uses. Meanwhile, roads are neglected and not built. More people would probably use public transportation if it wasn't an inefficient homeless shuttle (a couple years ago, two passengers were stabbed to death on the light rail: https://en.wikipedia.org/wiki/2017_Portland_train_attack). If I want to take public transportation to work, it would take me over an hour and a half plus walking vs. a 15-20 minute car ride. And at night, I often see buses driving around with no passengers. I suspect electric driverless cars will make the whole system completely unnecessary and obsolete in a few years and just one more example of waste typically found only in larger cities.
I have never been to NYC, but I have heard that their public transportation system is far better than most cities. Probably due to the fact that the subways are completely independent of the street traffic. Unlike my hometown where the light rail shares the same roads in the city as the cars...so it's just one ugly bottleneck and represents the execution of a really bad idea.
I know first hand public transportation in NYC, Washington D.C., Toronto (Canada), Montreal (Canada), Madrid (Spain), Sevilla (Spain), Paris (France), and I can tell you that NYC public transportation is by far the worst of all the cities above mentionned. Size of the rats, for instance. The biggest are in NYC. You go there, rats are literally crawling under you there! You should see by yourself how it sucks! Don't trust your ears, they are bound to listen to mostly crappy populace manipulators! Trust your own eyes and feelings!
Texas actually has a study on that and what they found is that yes, a majority still vote Democrat the first year. The second year is less (can't remember the percentage), by the fifth year over 90% vote Republican.
That's actually surprising. Although, how can they tell how people voted? I thought voting records were private and only one's party affiliation (if they choose to disclose) is public data (at least in some states).
I could deal with rats if an hour commute became 15 minutes. My gripe with most public transportation is that all tax-payers become forced to subsidize something that only a very small minority of the population uses and mostly because it's far less efficient (timewise) than the alternative.