[quote=FlyerInHi][quote=CA renter]
The vast majority of the money that funds retiree benefits comes from investment returns (also, as you know), not from “taxpayers.” [/quote]
Gotta love this one….. from investment returns, which means Wall Street and the financial system. Oh gosh, where would we be without those investment returns?
But never mind if the pension funds are mismanaged or assumed rate of returns don’t pan out. Just tax those who are less worthy than public employees, never mind that we did just fine for 35 years without such taxes.[/quote]
That’s exactly why we’re in this mess. Once upon a time, before Prop 13 and Wall Street’s takeover of the pension funds, the funds were only allowed to invest in government bonds and very safe corporate bonds. Over the years, Wall Street’s lobbyists pushed hard to let the pension funds put more and more money into riskier and riskier investments. What was once managed by boring, in-house, mostly salaried govt fund managers started being taken over the “financial wizards of Wall Street” and fast-talking hedge fund managers with all of their “financial innovations” that they sold to the govt (and earned hefty commissions as a result, but there is no public outcry to claw back their compensation…odd, no?).
Then, the lobbyists for apartment owners (and for some commercial building owners and land owners) pushed Prop 13 through by convincing the masses that it was going to “keep granny from being taxed out of her house.” What it did was shift the tax burden from RE owners/investors to income and sales taxes, and other types of revenue generators across the state. Prop 13 just shifted the tax burden, and shifted power from local governments to the state.
While California has long had housing bubbles, the income tax volatility can be even greater, especially because so many California residents rely on investment income and income from jobs that are unusually sensitive to changes in the economy.
After Prop 13, with the change toward an over-reliance on revenues from very high income earners with incredibly volatile earnings, our governments have had to struggle with even more volatile revenues. Add to that the over-reliance on the market performance of “innovative financial products” in the pension funds, and you’re asking for disaster.
It’s this boom/bust nature of the markets that has created such volatile revenues (and increased pension costs when markets drop), and state/local governments struggle to keep up with those changes. Again, everybody is standing with their hands out (unions just being one of MANY groups) when revenues are high. If the government tries to save during the good times, they are accused of “taxing too much” or not spending enough on the public good. The type of work that government does is long-term in nature and not easy to change on short notice, so when revenues suddenly drop, they are stuck.
We need to fix the boom/bust nature of our economy and/or stabilize revenues and spending to account for these market shifts. ALL stakeholders need to be a part of this process, and that includes taxpayers as well as govt employees, private contractors, special interest groups, developers, etc.
