The Revenue Demands of Public Employee Pension Promises

Robert Novy-Marx and Joshua D. Rauh

No 18489, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We calculate increases in contributions required to achieve full funding of state and local pension systems in the U.S. over 30 years. Without policy changes, contributions would have to increase by 2.5 times, reaching 14.1% 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 goes to pay down legacy liabilities while half funds 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: E62 H31 H55 H62 H70 H74 (search for similar items in EconPapers)
Date: 2012-10
Note: AG PE
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Citations: View citations in EconPapers (2)

Published as Novy-Marx, Robert, and Joshua Rauh. 2014. "The Revenue Demands of Public Employee Pension Promises." American Economic Journal: Economic Policy, 6(1): 193-229. DOI: 10.1257/pol.6.1.193

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