Tag Archives: Manhattan Institute

Public Sector Inc.

The Manhattan Institute has a new website: Public Sector Inc. featuring the latest research, news, interviews, and articles on public sector unionism and in particular on the crisis in state and local pensions. Edited by Manhattan Institute fellow, Josh Barro, the site includes my article on the discount rate and how it has affected the management of pensions as well as a podcast with E.J. McMahon on the same topic.

Reform of public sector unionism is sure to be a major policy issue facing the states in the coming decade. Josh notes at PSI’s blog that Governor Tim Pawlenty in Minnesota has written in today’s Wall Street Journal about what states need to do to fix the fiscal disaster that public sector unionism has delivered to state governments – and that includes getting the accounting of public sector liabilities, right.

State Tax Rates and Health Care Reform

E.J. McMahon of the Manhattan Institute calls it a “sledgehammer” to New York City.

This week, the Tax Foundation released this table. It shows what each state’s top tax rate looks like with the House Bill’s three surtaxes, targeted at high earners, to pay for nationalized health care.

Three states meet the 57 percent tax rate mark: Oregon (57.54%), Hawaii (57.22%), and New York (56.9%). At the very top of the list is New York City with a 58.68% top tax rate.

There is not much improvement for the remaining 47 states; the bottom ten states face a top rate of 47.25 percent.

What is the likely scenario in Manhattan? It’s not just Wall Street’s top earners who will bear the burden (or flee for other professions or places): it is small and/or growing businesses. As the New York Post writes, “The legislation is especially onerous for business owners, in part because it penalizes employers with a payroll bigger than $400,000 some 8 percent of wages if they don’t offer health care.”

Here’s a picture, courtesy of the New York Post:

Furloughs v. Bankruptcy: The New Unionism

New Jersey continues to stare straight at bankruptcy.  Revenue projections indicate that this is not an ordinary crisis . A shortfall of $2 million is projected.  Income tax revenues have fallen 40 percent. It is going to be painfully tough for Governor Corzine to balance the budget by June 30th. His latest proposals to cut spending include a furlough for union employees, a request for a $2 billion line of credit, less aid for colleges, and a $125,000 cut in aid to 12 independent living centers for the disabled. But program beneficiaries are not happy. There is a protest against the latter today at the Trenton statehouse.  Union workers are threatening to take the governor to court over his proposed furloughs.

Part of the driving force behind New Jersey’s imminent bankruptcy is the growth in salaries, pensions, and health benefits for unionized workers, including teachers. The state’s income tax is 100 percent Constitutionally dedicated to providing “Property Tax Relief.” This is a misnomer. It actually goes mainly (70 percent) to supplementing school budgets, and most of that take goes to 31 Abbott districts. Administrative  costs for teachers have skyrocketed in these districts over the decades.

Another source of trouble – the state’s pension system – negotiated by unions, agreed to by the state, with the costs passed through to municipalities, which are responsible for paying for fire and police benefits.  Result – the second highest property taxes per capita in the nation.

The mark of  public sector unions in directing New Jersey’s state and municipal budgets has been strong and devastating. And New Jersey is by no means alone. Steven Malanga of the Manhattan Institute,  writes in today’s Wall Street Journal about a very important distinction that bears repeating:   these are public sector unions – not private sector,  heavy industry unions

This phenomenon – the decline of the private sector union and the rise of the public sector union was identified and developed by my  economics professor, Dr. Leo Troy of Rutgers.  See his book, The Twilight of the Old Unionism.  His work on this subject is worth reading.