What Seattle’s income tax fight says about America’s pension mess

Seattle is not alone. Unfunded pension liabilities will (have) put a crush on many cities and states that promised too much to their government workers during another era.

(From FOX News)

Although Seattle’s budget has grown since 2012 from $4.2 billion to $5.3 billion, city leaders say they need even more revenue. And they want that money from the city’s higher income residents. Seattle’s new income tax, which is aimed at those earning $250,000 a year or more, would provide additional revenues for expanding homeless services, building more affordable housing, creating, “green” jobs, and reducing the city’s carbon emissions. Budget officials estimate that after administrative costs the tax would net the city about $130 million annually.

But looking over Seattle’s pension woes, what’s striking is how much tax money the underfunded system is already gobbling up, and how much more it will require. Like many cities and states, Seattle guaranteed its workers generous pensions based on optimistic assumptions that have proved faulty.

The stock market crash that began in late 2007 devastated the retirement system, robbing it of hundreds of millions of dollars in assets. Its debt subsequently soared from $175 million in 2008 to more than $1 billion two years later.

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