Pensions are Not The Problem!

In seeking to find a solution to the economic woes, both on the Federal and State levels, pensions have been singled out as a major contributor to the problem. Now, while I’ll admit that there are some excessive pensions and abuses, which should be addressed and reformed, it is all legal.

The reality is that those who think pensions are the problem are barking up the wrong tree. In fact, very little has been said in regard to, what I think is, a better solution. The way our economic system operates, the honest absorb the brunt of an ever increasing tax burden because tax revenues are simply not sufficient.

I believe the solution lies in addressing the underground economy. Sometimes called the shadow economy, it is an ever growing economy outside of the tax structure. Just the legal, but unreported, underground economy was estimated to be $2 trillion in 2010. That’s unreported, non-taxed money, enough to more than cover our country’s debt under Obama’s proposed budget! That figure is not including the illegal market such as drugs and prostitution, etc. As the International Monetary Fund reported in a Mar.2002,article, “Hiding in the Shadows”, by Schneider and Enste:

“Transactions in the shadow, rather than the official, economy keep state revenues lower than they otherwise would be, and in turn reduce the government’s ability to provide goods and services. Governments may respond by raising individual and corporate tax rates.”, which leads to tax increases for the honest. So it would be wiser, fairer, and more profitable for the government to crack down on the “under-the-table” illegal business than to penalize the honest workers who have legitimately earned their pensions!  The IMF article by Schneider and Enste also noted:

“Shadow economies tend to be smaller in countries where government institutions are strong and efficient. Indeed, some studies have found that it is not the higher taxes per se that increase the size of the shadow economy, but ineffectual and discretionary application of the tax system and regulations by governments.”

Our government should expedite the matter of making illegal aliens, legal, so they can contribute to the tax base. Also, the next time that individual, whether construction worker, plumber, landscaper, oil company or whomever, offers your two prices- the cheaper cash price (which will not be reported) or the check price (which will),we need to stop and think. Short term we may save a few dollars, but by contributing to the underground economy we are agreeing to pay more taxes- his taxes! The illegal two-family homes (the bane of suburbia) is unreported, untaxed income.

However, this is not just an economic issue. It is a moral issue as well. The Bible has much to say about honesty and money. In fact, Jesus Himself paid taxes (Matthew 17:25-27) although I would not encourage anyone to try to duplicate His method. The Apostle Paul writes in Romans ,

“Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue;...”

And in Proverbs 11:1 we read;

“The Lord abhors dishonest scales, but accurate weights are His delight.”
   
Not only should we all blow the whistle on every one of those who engage in this rampant and illegal activity, they should understand that they are engaged in a sinful practice and should repent. And lets stop straining gnats and swallowing camels and leave the honest workers who pay taxes alone.  Their pensions are not the real problem, only a casualty of the underground economy.