Working Paper: NBER ID: w18489
Authors: Robert Novy-Marx; Joshua D. Rauh
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.
Keywords: No keywords provided
JEL Codes: E62; H31; H55; H62; H70; H74
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| state economic performance (H73) | pension funding needs (H55) |
| current policy (E64) | future funding needs (I22) |
| asset return assumptions (G12) | required increase in contributions (H55) |