In today's New York Post, Manhattan Institute President Lawrence Mone points out that lobbying by the New York State's public unions for higher taxes on the rich would essentially mean transferring benefits from one set of millionaires to another. That's because much of the budget pressure on the state and its municipalities is coming from soaring pension and benefits costs for public workers. As Mone points out, the value of public sector pensions alone in New York is so high that private workers with 401(k) retirement plans would have to save more than $1 million in order to enjoy the same level of pensions. And taxpayers are paying a steep price for this. To understand how, take a look at the chart below.
This chart, created by Manhattan Institute fellows Josh Barro and E.J. McMahon, shows the increasing contribution that public sector employers, that is state and local governments, have had to make to fund pensions. New York City's contributions have gone from under $1 billion in 2000 to nearly $7 billion in 2010 (they're now above $8 billion). School districts throughout the state have seen their collective pension costs rise from about $200 million a decade ago to nearly $1.5 billion. These rising costs create what I call a crowding out and soaking up effect. They crowd out other spending and also soak up tax revenue increases. For instance, New York City's increases in pension contributions have soaked up one-third of the increase in city tax collections since 2000.