Agree or not, the fact is that in many states a major contributing factor toward the level of your property and other taxes is the cost of state employee pensions and other benefits including retiree health care coverage. Sadly, the situation is not getting much better even though some modest steps have been taken to change benefits (mostly applicable to yet be hired workers).
In New Jersey they have placed a cap on property tax increases of 2% a year – but guess what, if a town needs more to make its contribution toward public employee pensions and health benefits it can go above the cap. What do you think will happen?
Aside from what most measures would define as generous benefits (especially when measured against the benefits of the people paying taxes to fund public employee programs), state politicians manipulate funding and thus understate liabilities. For example, what chance do you think you have to earn an 8% long-term annual return on your investments? That old and unrealistic assumption is still used by some state pension plans thereby significantly understating the liabilities for promised benefits. Sooner or later the real costs will have to be accounted for and paid…even higher taxes required.
When it comes to the promises made for retiree health care benefits, many states ignored or did not even know the billions of dollars in liabilities they had incurred. Again, these benefits typically far outpace the comparable benefits in the private sector.
When someone questions this situation they are accused of attacking teachers, police officers and firefighters. That is a short-sighted strategy to divert us from the scope of the problem and the consequences of not fixing it. In fact, such a strategy is much like the AARP’s reaction any time there is an effort to effectively manage Social Security and Medicare.
You should be concerned, look beyond the rhetoric.
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