New Jersey Senate President

Top New Jersey Lawmaker Calls for Tax on Millionaires to Help Fund Pensions

A New Jersey court ruled last month that the state acted illegally in cutting its pension contributions over the last two years.

As a result, the state will need to pay its full contribution in 2015 – which means New Jersey will need to come up with about $1.6 billion that hasn’t yet been budgeted for.

In lawmakers’ search for new streams of revenue, one idea has come to the forefront.

New Jersey Senate President Stephen Sweeney is proposing a tax on millionaires.

The policy would boost the income tax on earnings over $1 million and could raise $600 million in revenue in its first year, but Gov. Chris Christie has historically been opposed to the measure.

More from NJ Spotlight:

Senate President Stephen Sweeney (D-Gloucester) said [a millionaire’s tax] would help the state make “a good-faith effort” while giving public-worker unions an incentive to cooperate with government to make benefits more affordable.

“In my mind that means a millionaires tax, it really does,” Sweeney said in an interview with NJ Spotlight.

Though a bill hasn’t been crafted yet, he envisions something similar to the legislation lawmakers sent Christie last year that would have temporarily upped the income-tax rate on earnings over $1 million from 8.97 percent to 10.75 percent.

[…]

According to the Tax Foundation, a Washington, D.C.-based organization that tracks state tax policies, New Jersey’s 8.97 percent top-end income tax rate is the sixth-highest in the country, behind California, 13.3 percent; Hawaii, 11 percent; Oregon, 9.9 percent; Minnesota, 9.85 percent; and Iowa, 8.98 percent.

[…]

The New Jersey Office of Legislative Services, the nonpartisan research wing of the state Legislature, said last year when it analyzed Sweeney’s proposal that boosting the top-end rate on earnings over $1 million would generate an estimated $580 million to $615 million in the first year.

Another concern Christie raised last week was that increasing the tax rate on millionaires could send more of them packing to states that already offer lower income tax rates, or levy no income tax at all.

That’s because the top 1 percent of tax filers typically cover roughly 40 percent of the total income tax haul for New Jersey, according to Department of Treasury figures…

It’s likely that the majority of New Jersey residents would be supportive of a millionaire’s tax. In a 2014 poll by Monmouth University’s Polling Institute, 66 percent of residents said they supported a tax on high earners, with revenue going toward pension contributions.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

Video: Top New Jersey Lawmaker Weighs in on Pension Payment Ruling; Talks Taxing Millionaires to Fund Pensions

New Jersey Senate President Steve Sweeney sat down for an extended interview this week, and it didn’t take long for the conversation to swing to pensions.

In the clip above, Sweeney shares his reaction to the court ruling that will force the state to pay its full pension contribution in 2015, pending appeal.

Below, Sweeney talks about the idea of levying a tax on millionaires and using the revenue to pay down pension debt.

Is 80 Percent Funding All It’s Chalked Up To Be?

When it comes to pension funding, an 80 percent funded ratio is the benchmark for a “healthy plan”.

But over at the STUMP blog, actuary Mary Pat Campbell has penned a post taking issue with the 80 percent “rule”. According to Campbell, 80 percent isn’t a magic number that makes pensions “okay”.

The post is published below:

______________________

By Mary Pat Campbell, originally published at STUMP

I have just about had it with the 80 percent.

Unlike the commonplace idiocies of ‘You only use 10% of your brain’ or ‘The Great Wall of China is the only manmade object visible from space’, the 80 percent myth is dangerous.

I speak, of course, of the supposed percent fundedness level at which public pensions are “okay”.

The American Academy of Actuaries has a brief on the 80% pension funding myth, and I will give loads of examples of how even “100% funded” plans have been shown to be shaky.

But that’s not for today.

Today, I have decided to keep track of every idiot who refers to this 80% funding level (or something even worse) as proof that a pension plan is or is not okay. Generally, reporters fall afoul of this, and this is not necessarily concerning. People don’t think of reporters, as a group, as expert in anything.

But when there are politicians directly making decisions about public pensions, union leaders arguing about their public pensions, and dear lord, public plan TRUSTEES putting this bilge forth, that is super dangerous.

If you want to follow yourself, just create a google news alert on ‘80 percent pension’ — google news alerts don’t necessarily work the same for everybody, so feel free to email me at marypat.campbell@gmail.com if I missed any good (or, rather, horrible) examples.

So here goes:

Congrats, New Jersey Senate President Steven Sweeney — you are the inaugural member of my 80 Percent Pension Funding Hall of Shame!

TRENTON — State Senate President Stephen Sweeney is floating an idea to move the goal posts for funding public workers’ pensions in order to take pressure off the state budget.

Sweeney (D-Gloucester) said today the state — which by law is supposed to fund the pension system 100 percent by 2018 — should instead focus on getting the pension system 85 percent funded to put it in line with private sector plans that are considered healthy.

New Jersey’s pension funds are currently funded at about 54 percent, in part because the state skipped or made only partial payments for a decade. Under a 2011 law pushed by Sweeney and signed by Gov. Chris Christie that included cuts to workers’ pension and health benefits, the state is required to ramp up its payments to once again fully fund the system. However, Christie cut the payments by more than $2 billion for this budget year and the previous one.

Yes, yes, he picked 85 percent, but anything less than 100 percent is questionable. Especially with New Jersey math.

Here’s a nice kicker:

“The governor paints a very bleak picture by saying ‘look at what a big hole we’re in,’” said Sweeney. “The governor’s focus is basing everything on us being fully-funded. That’s not a realistic number. And a lot of pension systems live being 85 percent funded, or in the 80s.”

Yeah, they live right up until they don’t.

Ask the Detroit retirees what they think of their supposedly almost-100-percent-funded pension – pension benefits that got cut (note: it was not as fully funded as they thought, but that’s for another time.)

NEWS ALERT SENATOR SWEENEY: lots of public pensions aren’t doing well. While 85% funded would be a lot better than where NJ pensions are right now, that is not a laudable end goal.

I’ve already got THREE OTHER EXAMPLES for my new Hall of Shame from just this week, so this Hall of Shame is going to be filling up rapidly.

With respect to politicians, or union leaders, or other such, there is no cure (that is, I, personally, can’t do much about it other than mock them on the blog).

But at least with regards to reporters, I will be writing them and/or their organizations with links to the Academy’s brief. And maybe the blog posts where I call them idiots. We’ll see.