Monday Thoughts – Pension Problems Increasing Your Tax Bill?


Just exactly how much does having generous municipal benefits cost you as a taxpayer? Though it may range from city to city, for Danville, IL, they pay 50% more for their property taxes now than they would if they had no unfunded pension liabilities.

See Article Here

Though their case may be an outlier (and then again maybe it ISN’T), you can see how poorly planned pension benefits from a long time ago can cost HUGE amounts of money now. Others have written eloquently about how, in order to bypass pay raises, many cities (and private corporations – ahem, GM) offered generous pension/health benefits mainly because it pushed the cost into the future and well past their time to worry. So I won’t write about that now. Suffice to say it was and is a widespread practice.

Of course this is a sad way to plan, but did you think your elected officials (and many corp. execs) would actually tell the truth? They have their own pensions they are trying to accrue and that involves KEEPING their jobs – not telling the truth to often times poorly informed voters who may vote them out. This is why I have, through their laughter at me, told people you need to take care of yourselves. We still have many people in this country that have the attitude that daddy government will take care of them. This opinion is faily recent in American history (perhaps 1935 on – even though the number of people who actually think this is declining there are still plenty) and not very American because it gives people an excuse to abdicate responsibility and prudence – but that’s another story.

I want to focus on the forward thinkers and prudent folks who prepare for problems and perhaps even thrive through them. Pension problems just may cause issues with your property tax, and certainly fees for many services will rise and municipalities will continue to increase the parking tickets to pull in revenue. So prepare for that. if we run the printing press to fund all of these underfunded pensions, then you can ratchet your inflation expectations even HIGHER – prepare for that too.

As I stated before, keep an eye out in your local papers for the effects of declining tax revenues and increased pension liabilities. I know in Medford, MA (my hometown) they are threatening to fire 162 teachers (basically all of the untenured ones) unless the teachers union comes up with some type of shared-sacrifice plan. Cities all over have been scrambling with the same issues and officials are trying for now, not to axe too much or tax too much it seems. Perhaps everyone has their fingers crossed hoping things will get better. But I’m afraid we overinflated everything so much during the housing bubble that it will be some time before the economy could REALLY grow back to those levels (as opposed to being INFLATED to those levels by cheap money).

More on Medford’s attempts to increase revenue HERE.

Chris Grande