Who Volition Pay Unfunded Patch Pensions?
Homeowners. So says a nice WSJ op-ed yesteryear Rob Arnott in addition to Lisa Meulbroek, in addition to a proposal yesteryear Chicago Fed Economists Thomas Haasl, Rick Matton, in addition to Thomas Walstrum.
The latter was a little proposal, inwards the Jonathan Swift tradition. Despite Crain's Chicago Business straight off labeling it "foolish," "inhumane," in addition to "the dumbest solution yet, the kickoff article points out its inevitability. If indeed courts volition insist that benefits may non locomote cut, hence dry reason governments must heighten taxes, in addition to this is the exclusively i that tin practise the trick.
U.S.A. tin travail to heighten income taxes. And people volition move. U.S.A. tin travail to heighten line organization taxes. And businesses volition move. What tin states taxation that can't move? Only existent estate. If the dry reason drastically raises the belongings tax, at that topographic point is no choice merely to pay it. You tin sell, merely the novel buyer volition locomote willing to pay much less. Pay the taxation piece of cake over time, or lose the value of the belongings correct away inwards a lower price. Either way, the possessor of the belongings on the solar daytime the taxation is announced bears the burden of paying off the pensions.
There is a an economical regulation here, the "capital levy." Influenza A virus subtype H5N1 authorities inwards problem has an incentive to view existing capital, once, in addition to hope never to practise it again. The hope is important, because if people know that a upper-case alphabetic lineament levy is coming they won't invest (build houses). If the authorities tin describe it off, it is a taxation that does non distort decisions going forward. Of course, getting people to believe the hope in addition to invest over again afterwards the upper-case alphabetic lineament levy is... well, let's tell a tricky business. Governments that practise it in i lawsuit bring a vogue to practise it again.
In sum, a belongings taxation is essentially the same affair every bit the authorities grabbing one-half the houses in addition to selling them off to brand pension obligations. And unless a miracle happens, it is the exclusively means out.
Update: We're at that topographic point already, tell Orphe Divounguy, Bryce Hill, in addition to Joe Tabor at Illinois Policy. The volume of recent increases inwards belongings taxes bring gone to pay for pensions, non to a greater extent than teachers, police, etc.
Update 2: I should clarify, that I flora this an interesting slice of economic science to a greater extent than than anything else. I practise non intend this is the correct solution, nor is it the exclusively one. Most other countries roughly the world, having made unsustainable pension promises, discovery some means roughly them in addition to trim pensions. It happens. Some form out of federal bailout is non unthinkable either. Moreover, the all of a abrupt announced surprise in i lawsuit in addition to for all belongings taxation increment is unlikely, encounter update 1. So the states are probable to reap many disincentive effects of expected increases inwards belongings in addition to other taxes.
Finally, almost importantly property taxation payers vote! They are unlikely to sit down even hence for such a mass expropriation of their wealth.
The latter was a little proposal, inwards the Jonathan Swift tradition. Despite Crain's Chicago Business straight off labeling it "foolish," "inhumane," in addition to "the dumbest solution yet, the kickoff article points out its inevitability. If indeed courts volition insist that benefits may non locomote cut, hence dry reason governments must heighten taxes, in addition to this is the exclusively i that tin practise the trick.
U.S.A. tin travail to heighten income taxes. And people volition move. U.S.A. tin travail to heighten line organization taxes. And businesses volition move. What tin states taxation that can't move? Only existent estate. If the dry reason drastically raises the belongings tax, at that topographic point is no choice merely to pay it. You tin sell, merely the novel buyer volition locomote willing to pay much less. Pay the taxation piece of cake over time, or lose the value of the belongings correct away inwards a lower price. Either way, the possessor of the belongings on the solar daytime the taxation is announced bears the burden of paying off the pensions.
There is a an economical regulation here, the "capital levy." Influenza A virus subtype H5N1 authorities inwards problem has an incentive to view existing capital, once, in addition to hope never to practise it again. The hope is important, because if people know that a upper-case alphabetic lineament levy is coming they won't invest (build houses). If the authorities tin describe it off, it is a taxation that does non distort decisions going forward. Of course, getting people to believe the hope in addition to invest over again afterwards the upper-case alphabetic lineament levy is... well, let's tell a tricky business. Governments that practise it in i lawsuit bring a vogue to practise it again.
In sum, a belongings taxation is essentially the same affair every bit the authorities grabbing one-half the houses in addition to selling them off to brand pension obligations. And unless a miracle happens, it is the exclusively means out.
Update: We're at that topographic point already, tell Orphe Divounguy, Bryce Hill, in addition to Joe Tabor at Illinois Policy. The volume of recent increases inwards belongings taxes bring gone to pay for pensions, non to a greater extent than teachers, police, etc.
Update 2: I should clarify, that I flora this an interesting slice of economic science to a greater extent than than anything else. I practise non intend this is the correct solution, nor is it the exclusively one. Most other countries roughly the world, having made unsustainable pension promises, discovery some means roughly them in addition to trim pensions. It happens. Some form out of federal bailout is non unthinkable either. Moreover, the all of a abrupt announced surprise in i lawsuit in addition to for all belongings taxation increment is unlikely, encounter update 1. So the states are probable to reap many disincentive effects of expected increases inwards belongings in addition to other taxes.
Finally, almost importantly property taxation payers vote! They are unlikely to sit down even hence for such a mass expropriation of their wealth.
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