Photo: jimmywayne via Flickr
First, some ground rules:
- Nothing is illegal
- Anything is possible if you can dupe enough people into it
For anyone who has followed New Jersey elections or budgets, number (1) should be self-evident and anyone who has witnessed the private sector take away their employees’ defined benefit plans only to lure them with promises of ‘owning their retirement’ into 401(k) savings plans knows that number (2) is viable.
With those as givens, here is my practical two-step solution to the New Jersey pension crisis that is simplicity itself:
1) Create a new source of dedicated revenue that will be deposited directly into the state pension system.
2) Have that source of revenue be a tax on state pensions.
Some of the advantages:
- Easy to collect since we could institute automatic withholding
- Would hit a good percentage of out-of-staters who don’t vote here any more
- Has the beauty of having the tax code to hide behind
- Manipulable in that tax rates can be set to meet costs and can even be made higher or lower at different ages or for different professions to meet ancillary needs
To any doubters, if someone had told you 25 years ago that private sector employers would be able to terminate all their defined benefit plans and provide their employees only savings plans that they would primarily fund themselves you would have likewise scoffed. I’m telling you this will work, just carve out an exemption for judges.
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