The Revenue Demands of Public Employee Pension Promises

Robert Novy-Marx and Joshua Rauh

American Economic Journal: Economic Policy, 2014, vol. 6, issue 1, 193-229

Abstract: We calculate increases in contributions required to achieve full funding of state and local pension systems in the United States over 30 years. Without policy changes, contributions would have to increase by 2.5 times, reaching 14.1 percent of the total own revenue generated by state and local governments. This represents a tax increase of $1,385 per household per year, around half of which would go to pay down legacy liabilities while half would fund the cost of new promises. We examine sensitivity to asset return assumptions, wage correlations, the treatment of workers not currently in Social Security, and endogenous geographical shifts in the tax base.

JEL-codes: H55 H75 J26 J45 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/pol.6.1.193
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Citations: View citations in EconPapers (18)

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