Wednesday, August 21st, 2019

Pension money doesn’t fall out of the sky


There’s a new myth, thanks to Rick Ungar at Forbes, being spread by the left that somehow state employee pensions are not a burden on the taxpayer. This is almost as good as the lie that there is no budget crisis. Christian Schneider posts in the Corner at National Review Online a response,

The Wisconsin Retirement System and deferred compensation are two completely separate things. Full-time state- and local-government employees are participants in the Wisconsin Retirement System, which uses taxpayer money to fund both the state (around 5 percent of salary) and employee (another 5 percent) contributions to their pensions.

On top of that, if they choose, state employees can participate in the deferred-comp plan, where they decide how much of their money to set aside, pre-tax, and a portion is matched by the state. That is in addition to their traditional pension contribution.

All this can be found in Chapter 40 of the Wisconsin State Statutes, which clearly demarcates each program in separate subchapters. Further, the Wisconsin Retirement System is explained in detail in this paper from the Wisconsin Legislative Fiscal Bureau.

I would add that, even if Ungar were correct that the pensions were being funded entirely by deferred compensation (incorrect), that Ungar is not saying where that compensation comes from. The money doesn’t just fall from the heavens to rain on the state employees, but is instead taken out of the private sector economy through taxation.

Ungar gives the example of the professional athlete choosing deferred compensation,

Does anyone believe that, in the case of the ball player, the deferred money belongs to the club owner rather than the ball player? Is the owner simply providing this money to the athlete as some sort of gift? Of course not. The money is salary to be paid to the ball player, deferred for receipt at a later date.

However, the money does come from the team’s owner. Now or later, it was the owner’s money before he paid it to the player. It didn’t just magically appear. And while Ungar points to possible tax benefits for the team (and salary cap manipulation, I would add), there are no such benefits for the state of Wisconsin.

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