But income tax revenue from the wealthy tends to be volatile and unreliable—in Connecticut’s case, as the WSJ notes, the hedge fund industry’s decline has led to lower-than-expected tax receipts (states like California have run into similar problems when taxing their own economic elite). Moreover, financiers are mobile, and can move to other states if rates get too high.
It’s tempting for blue model partisans to see the state and local pension crisis as a temporary problem that can be papered over with high-end tax hikes. And while the rich may well need to pay more to address the problem, it won’t be enough. The forces that have brought about the blue model crisis are structural: Overly-powerful public sector unions, dishonest accounting practices, chronic political can-kicking, and a defined-benefit pension model that doesn’t work in the 21st century. These are deep-rooted problems that will require major reforms in the way government runs and the way the civil service is organized. As Connecticut Democrats are realizing, the Bernie Sanders approach to government deficits—tax the millionaires and billionaires, then tax them some more—is simply not adequate to the scope of the crisis.
Saturday, May 20, 2017
I Wonder If A *Two*-Party System Might Help
Maybe not, but the one-party system isn't doing any good, either: