So, if we enforce these pension obligations, which are unaffordable without massive tax increases or massive cuts to state and local services (or both), virtually everyone who can afford to move to jurisdictions without such obligations, will do so. They’ll sell their property (and if they can’t sell it, they’ll donate it charity), even at something of a loss, and cut all their ties to the high tax states.
That’s all perfectly legal and perfectly reasonable on the individual level.
But, what then? If the 10,000 or so largest taxpayers leave the state, it will devastate income tax collections and, as property values collapse and as people don’t have the income to pay property taxes, states will lack the money to pay these pensions.
They won’t be able to raise taxes much at that point, and they can’t do a damned thing about people leaving the state. Pay the pensioners in scrip? The states can’t issue their own money, but they have issued ious in the past.
My writerssense is that the states ought to give the pensioners a choice now: 1) switch to 401(k) and defined contribution plans NOW, 2) accept substantially reduced benefits, or 3) get paid in scrip, which may or not be accepted by anyone outside of government, and which may or may not trade at a discount.