Category Archives: generational equity

DeBlasio’s Last New York City Budget: He Predicts Even More Inequality and Gentrification, or Else NYC is Toast, Because Those Cashing in And Moving Out Will Take More Off the Top No Matter What

Mayor Bill DeBlasio released his last budget recently, and it assumes that pre-pandemic trends will continue.  The rich will continue to get richer and the stock market bubble will continue to inflate, thanks to the federal government doing whatever it takes, regardless of the long-term cost, to prevent asset prices from going down.  Despite higher and higher taxes, the rich will stay in New York City and just keep paying.  So will hundreds of thousands of young adults, who will continue to live in less and less space for higher and higher rents and accept higher taxes, fees and fares and diminished public services, including crowding and unreliable service on the subways no elected official is in charge of.  More and more economic activity and educated workers will be concentrated in New York City compared with the suburbs, and in metro New York compared with the rest of the country.

All this will offset the extent to which DeBlasio’s (and all the other NY politicians) public union and contractor supporters will continue to get richer and richer, compared with other workers.   Other workers whose lower pay will keep the cost of living down for public workers and retirees, as the overall inflation rate remains below the long-term trend.  Based on these assumptions, the total city budget will grow more slowly than the total personal income of NYC residents over the long term.  Even if the average New Yorker continues to become worse off, because there will be more and more working adults.

But if that is what has happened, and will continue to happen, then why have NY’s state and local taxes been increased, over and over, and risen as a percent of personal income?  Instead of falling.  Why are debts continually increasing, and with interest payments rising as a share of city residents’ personal income despite rock bottom interest rates (also assumed to be permanent)?   Instead of debts being paid down.  Why does the Mayor plan to hand early retirement deals to city workers age 55 and over yet again, to “prevent layoffs,” after having already agreed to no-layoff guarantees? And why, in this Mayoral campaign, is no one asking questions about any of this – in the place with the highest state and local tax burden in the country, where the media is full of claims that we deserve even less in return because we aren’t paying enough – notably by the police and teachers?

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Taxes & Generational Equity: New York State and New York City in 2020

With a deteriorating mass transit system, despite high and rising taxes and fares, and soaring rents (and property tax revenues from renters), young workers have been leaving New York City since 2015, a trend that has accelerated since the COVID-19 pandemic.  And there is talk that the wealthy will move away since they will now have to pay taxes, after not having to pay taxes in the past, according to various headlines over the past two years.  From “not taxing the rich,” according to those headlines, New York is suddenly taxing the rich more than any other state.  Even California.

In reality, of course, New York already taxed the rich, and everyone else, far more than any other state.  And it isn’t close.  As I showed here…

In FY 2017 New York State’s average state and local government tax burden was 13.8% of state residents’ personal income, compared with the U.S. average of 9.8% and 10.3% for California.  If New York City were a separate state, its burden would have been 15.1% of income, and rising, compared with 12.9% on average for the rest of the state.  And at that level, according to any elected officials who didn’t want to face a primary, and most of the local media, city residents deserved deteriorating public services, because they weren’t paying enough.

There is one group of people, however, who face a very different tax burden in New York, compared with other places.

https://www.businessinsider.com/personal-finance/new-york-state-affordable-retirement-social-security

Retiree David Fisher, 69, has lived in New York state since age 27.  He has found that while living there was expensive while he was working, New York is much more affordable in retirement.  This is primarily for three reasons: New York State doesn’t tax Social Security or retirement account distributions, the state has a program to reduce property taxes after age 65, and there’s a low cost of living in the Rochester, New York, area where he lives. 

Retired public employees, like the Senior Voters in our tax analysis of three prototypical Brooklyn couples, have it even better – none of their retirement income, paid for by poorer working serfs, is taxable.

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Taxes & Generational Equity: Federal Taxes in 2020

For the past four decades, the retired, the rich and (in some states such as New York) selected public employees and unionized employees of government contractors have become richer and richer, while ordinary workers in the private sector have become poorer and poorer.   It is estimated, for example, that the average Millennial is paid 25 percent less than the average Baby Boomer had been at the same age. 

https://www.wsj.com/articles/playing-catch-up-in-the-game-of-life-millennials-approach-middle-age-in-crisis-11558290908

At the same ages, Gen X men working full time and who were heads of households earned 18% more than their millennial counterparts, and baby boomer men earned 27% more, when adjusting for inflation, age and other socioeconomic variables.  Among women, incomes were 12% higher for Gen Xers and 24% higher for baby boomers than for millennials, using the same measures.

If one ignores the rising level of education, labor force participation and pay of women since 1980, this is a trend that actually started with those at the back end of the Baby Boom, who have been disadvantaged compared with earlier-born generations, those now in retirement, for their entire lives. After I called for a study of Social Security records some years ago, one found this.

Adjusting for inflation, the median male worker born in 1958 earned just 1 percent more during his career compared with the median man born 27 years earlier, in 1932. In fact, the median male born in 1958 earned 10 percent less during his career compared with the median male born 16 years earlier, in 1942. The lack of progress of mid-level male earners is not a surprise, of course. We know the median real hourly wage received by men reached a peak sometime in the 1970s. It has not surpassed that peak in any year since the 1970s, and in many years it has been far lower.

And yet it is work income that has been taxed more heavily over the past four decades.  Retirement income has received the same exemptions, and in fact even more exemptions, compared with the time when each generation was richer than the one preceding, rather than poorer, and seniors were more likely than working-age adults to be poor, rather than less likely to be poor.   And investment income has come to be taxed far less than work income.  At the federal level, one by one, both political parties have supported most or all of these tax deals to benefit the retired, rich, and the other organized selfish.  What does it add up to?  Let’s fire up the Turbo Tax and find out.

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Taxes & Generational Equity in 2020: An Updated Turbo Tax Analysis of Three Prototypical Brooklyn Couples

It’s tax time, and it has been six years since I last compared the federal, state and local tax burden on two prototypical Brooklyn couples using Turbo Tax and other information:  the Senior Voters, home-owning former NYC public employees who got to retire at age 56, and the Young Hopefuls, a couple trying to get by while renting and working.  Now that the Senior Voters are age 69 and receiving Social Security, and the Young Hopefuls are age 41 (with Baby Hopeful reaching age 15), it’s time to find out what has changed.  

In the past I showed that the Young Hopefuls, despite much being poorer, would pay a much higher percent of their income in taxes.  A large share of those taxes would go to pay for the pensions and senior benefits of senior voters.  When the cost of health care, child care and housing were included, the Senior Voters would have enough money left for a very affluent, high consumption lifestyle.  The Young Hopefuls would have barely enough money to get by, despite matching the median income of NYC households.  Worse, given soaring public and private debts, the Young Hopefuls will not be getting the same benefits when they are old themselves. Poorer than the Senior Voters had been in young adulthood, and also now in middle age, they will be even worse off at the end of their lives, due to deals a generation of senior voters cut with themselves to put in less and take more out.

As a new twist I have added a third couple:  Chad the Private Equity Guy and his new wife Trixie, originally from metro Chicago and the Chicago Merc, but now working in private equity in NYC while living in a luxury condo in Dumbo.  While the difference in the tax burden on the Young Hopefuls and Senior Voters shows how harshly work income is taxed compared with retirement income, especially public employee retirement income in New York, Chad and Trixie’s tax bill shows how much investment income is favored at the federal level.   And the deals for seniors and the rich have just kept getting richer, even as later born generations of ordinary Americans, on average, keep getting poorer and deeper in debt.   Both political parties have contributed to the trend, a reality that belies their alleged increasing partisan warfare.

So what percent of income would these three couples pay in taxes?

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Long Term Census Bureau Public Employee Pension Data for NY and NJ Through 2019: The Public Service Killers are Hiding the Fiscal Mass Graves

Three years have passed since I last appended data from the Governments Division of the U.S. Census Bureau to my spreadsheet of individual public employee pension plans in New York and New Jersey.  The latest data for 2019 may be found here.

https://www.census.gov/topics/public-sector/public-pensions.html

There were some big changes for 2019.  Both the pension plan identification codes, and the data item codes, have been changed from the prior few decades, and some data items previously available have been eliminated.   But an entirely new set of data items has been added as part of a separate “actuarial” file, with data on how well funded each state and local government pension plan is, its covered payroll, its total unfunded liability, and its discount rate.  

The new data shows something very important and perplexing that I have written about before – the New York State pension funds that also cover local government workers in the rest of New York State are far better funded than the New York City pension funds for employees of the City of New York and New York City Transit.  Even though the same New York state legislature has set the rules for both for decades.  And even though the people of New York City have paid far more into the city pension funds over those decades, with higher taxes for worse services as a consequence, than have people in the rest of the state.  How?  Why?  And why has the media failed to ask that question of the City and State Comptrollers, and pursue the answers?

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Universal Health Care: What the United States Somehow Can’t Afford Even Though We Have Already Paid For It, and Then Some

I recently came across this data from the OECD, on comparative health expenditures by country as a percent of GDP.

The data by financing scheme divides health expenditures into two categories: government/compulsory and voluntary/out of pocket.  The data shows that in the United States, the compulsory/government expenditures alone equaled 14.2% of GDP.  That compares with total health care expenditures at 10.8% of GDP in Canada, 12.1% in Switzerland, 11.7% in Germany, 11.2% in France, 10.3% in the UK, 11.1% in Japan and 10.9% in Sweden.  Those developed countries all have some kind of universal health care, albeit in widely differing systems.  And all have aging populations, many to a greater extent than the U.S. 

And yet we are told by so-called Republicans/conservatives that we can’t afford the added taxpayer cost of “socialist” universal health care, and by so-called Democrats/progressives that we would need to pay even more in taxes to get it – or even to just keep what we already have.  Why?  Not because of ideology.  Because both parties are in the pockets of special interests who benefit from this situation as it is.  Both parties includes, by the way, the Democrats.

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Remember This Day

For 40 years, the trends have been as follows:

1) The generations born in 1957 and earlier get richer and richer, and freer and freer of obligations to others (including family obligations and taxes), while those born later get progressively poorer and more burdened by responsibilities to those older.

2) The executive/financial class and political/union class cut deals with themselves, and use control of the federal, state and local governments, and private sector organizations, to get richer and richer.  And the serfs get poorer and poorer, and go deeper and deeper into debt, to pay for it.

3) The connection between those who are taking more and putting in less, and those who are forced to put in more and accept less, is disguised by separating them in time via debt.  The media refuses to allow a discussion of the link between the two.

When this crisis is over, how do you think these various groups will have turned out? What will each lose? Will some actually gain?

In five or ten years…

1) Will the rich be richer?

2) Will executive pay be this high or higher?
3) Will the former middle class be poorer?
4) Will taxes be higher?
5) Will public services be worse?
6) Will old age benefits for later-born generations be reduced?
7) Will the life expectancy of those born after 1957 be lower, and/or the death rate higher?

8)  In NYC, will mass transit service and other public services degrade even more, and will state and local taxes, having been repeatedly increased, increase yet again?

Will all this happen yet again?  These are the questions. Remember this day, years after the virus is in the rear view mirror.

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The New York City and State Budget Crisis: The Circumstances Beyond Their Control Are Only Beyond Their Control Because They Cut Deals to Make them Beyond Their Control

It’s a never-ending cycle.  When the economy is up and tax dollars are rolling in, the political/union class and executive/financial class negotiate deals with themselves to take more out, and/or put less in, to the City of New York, the State of New York, and agencies such as the MTA, because there is “plenty of money” and no one needs to be made worse off to pay for it.  Secret deals that are barely reported by what is left of the real news media, the portion of it that is willing to question what is going on and who is benefitting.  Irrevocable deals, deals guaranteed by contract, or by the constitution, even if those who received little or nothing in exchange, were not party to the negotiations, were not really represented there, and didn’t even know about them, are forced to pay for them.

Then a recession happens, and a budget crisis follows.   And the serfs – those who didn’t benefit from the deals, later-born New York taxpayers and service recipients, later hired public employees, those without special deals and privileges – are made even worse off due to circumstances beyond our control, as blame is cast in a circle.   

But are those circumstances really beyond anyone’s control? Even if the New York State constitution seems to put them there, that constitution could be changed, with the vote of two consecutive legislatures and a voter referendum.  One New York State legislature ends December 31st.  Another begins January 1st.  Changes to the state constitution could be on the ballot in November, 2021, as New York City residents went to the polls to vote for Mayor and City Council – if the powers that be wanted that happen.

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Who Are The Snowflakes Who Can’t Take the Heat?

I’m not a social media type guy – no Facebook, no Twitter, no Instagram –but due to changing personal circumstances I have spent some time on LinkedIn recently.  Last week a reporter posted a link to an article she had written for the publication Business Insider, itself based on an article on Bloomberg News

https://www.businessinsider.com/millennials-versus-boomers-wealth-gap-2020-10

Millennials may be the largest generation workforce in the US, but they’re also the least wealthy.

The generation holds just 4.6%, or $5.19 trillion, of US wealth, Bloomberg reported, citing recent Federal Reserve data. Boomers, however, are 10 times wealthier. They hold 53.2%, or $59.96 trillion, of US wealth. That’s also twice the $28.5 trillion of US wealth that Gen X holds.

This wealth gap is partially explained by the fact that boomers are older, so they’ve had more time to accumulate wealth. Millennials haven’t yet reached their peak earning years, and the youngest are still earning entry-level salaries.

But historical trends indicate that the wealth gap shouldn’t be this big. When boomers were millennials’ age in 1989, according to the Fed data, they held 21.3% of US wealth. That’s four times the 4.6% that millennials hold today.

This is not new.  The Federal Reserve releases this data, and other data on people’s personal financial situation, each year. And virtually all posts on LinkedIn pass with few if any comments.  

But in response to this one there were more than 600 comments, and a bunch of Baby Boomers, including those in positions of substantial economic authority according to their titles, pretty much lost their minds, with emotional responses that flew in the face of any evidence.  

https://www.linkedin.com/feed/update/urn:li:activity:6721562902681202688/

Showing that whether, to what extent, how and why later-born generations are worse off that those born previously is a massive issue hiding in plain sight, one that many people don’t want to hear about.  These are the sort of folks who accuse Millennials of being a bunch of “snowflakes” who don’t want to hear things at odds with “their truth.”  The reaction to this simple statement of factual data shows that perhaps the Millennials aren’t the snowflakes after all. If you don’t want to hide in your “safe space” with “your truth,” read on.

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