Some time ago, I posted a blog in which I offered the surmise that the whole reason for the pension crisis many firms are facing is that our stupid tax code encourages people to adopt devices for avoiding income in favor of untaxed or less taxed forms of compensation. Well, don’t you love it when someone comes along to support an idea of yours?
Check the following letter in today’s Wall Street Journal:
Any Wall Street Journal reader knows the need to diversify asset holdings, yet almost all of us rely on a single provider, our employer, for our wages, health care and pensions. (Even if employees directly contribute much of the funding, the employer usually is or selects the manager.) Why do we do that? Because our tax structure — in which employers deduct benefit costs when paid and employees receive benefits tax free or tax delayed until retirement — bribes us to be stupid.
No amount of regulation, especially by a federal government whose Social Security and Medicare benefit promises are far more unfunded than almost anything in the private or state and local government sectors, can be a true fix. The true solution is tax reform that removes the stupidity bribe and encourages people to provide for their own retirement and health care, either individually or in groups not connected with their employer.
Roger Nils Folsom
Professor Emeritus of Economics
San Jose State University
San Jose, Calif.
Thank you, Professor Folsom!
