December 8, 2011
New York Governor Andrew Cuomo, under enormous pressure from public-employee unions and Democrats in the state Legislature to extend New York's "millionaires' tax," is considering at least some higher taxes on higher incomes. The big irony here is that much of the money raised from any "millionaire" tax hikes would go to fund the growing phenomenon of public-sector millionaires, says Lawrence Mone, president of the Manhattan Institute.
These millionaires on the city payroll have been made so by generous salaries, but more so by astoundingly large pension benefits that are included when calculating a person's net wealth.
- A New York City public school teacher earning $100,000 can retire at age 55 with a pension of $60,000.
- A private-sector worker would need $1.2 million to buy an annuity with the same yield.
- It would take an even larger nest egg to replicate the pension income of city police officers -- they typically retire in their 40s and collect an average pension of $58,563 with a $12,000 annual supplement.
In the private sector, however, the Federal Reserve states that the average worker in his late 50s has a balance of $85,600 in his retirement account, and a net worth of $222,300 overall.
Many are quick to point out that many of these public workers labor in fields that are vital to America's growth or that are disproportionately dangerous, and that these facts warrants larger compensation packages. Yet, regardless of a comparison between private sector and public sector workers, it seems that public compensation at current levels is unsustainable.
- New York City, specifically, offers a guaranteed 8-percent annual rate of return for its pension holders.
- This benefit, in addition to the sheer volume of public workers, has led to increased city pension costs from about 4 percent of city tax revenues to 20 percent over the past decade, crowding out other vital public investments.
Therefore, lawmakers should consider more carefully the populations that they are taxing and the current status of the recipients of city revenue before key decisions are made.
Source: Lawrence Mone, "Municipal 'Millionaires': Tax Hikes to Fund Gov't 1 Percent-ers," New York Post, November 30, 2011.
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