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Study: State Budget Problems Could Be Solved by Matching Public Employee Pay to Private Sector
For Immediate Release November 20, 2008
Pete Sepp, (703) 683-5700
(Alexandria, VA) -- As state governments consider ways to address projected budget shortfalls and stimulate economic activity, an analysis by the 362,000-member National Taxpayers Union (NTU) released today offers one solution: a reduction in the "government employee union tax" -- the premium charged to taxpayers for covering the inflated salaries and benefits of organized public employees.
"Public-sector workers are far more likely to be unionized than their private-sector counterparts -- a fact that's reflected in the higher earnings of the state government workforce," NTU Director of Government Affairs Kristina Rasmussen said. "NTU's analysis shows how much lower state income tax collections could be if public employee wages were comparable to similar private-sector positions. Eliminating the 'government employee union tax' could save households in some states more than $1,100 in income taxes."
In 2007, state government employees (30.4 percent of whom are members of unions) earned a median weekly wage of $772, compared to $666 for private-sector workers (7.5 percent unionized). Unionized state employees in the same year commanded median weekly earnings of $865, while non-unionized state workers earned $731.
Many states where budget deficits and tax burdens are worst also have some of the biggest public-private sector compensation gaps. California, Illinois, Michigan, New Jersey, and New York, for example, all report union tax rates near or above 30 percent, and all have faced chronic budget-balancing problems. Others close to or over the 30 percent mark, such as Connecticut, Hawaii, Rhode Island, and Vermont, impose heavy taxes on their citizens. Eliminating the "government employee union tax" could yield aggregate budget savings of $12.4 billion in California and $8.2 billion in New York.
"A compensation realignment between government jobs and private sector positions is long overdue," Rasmussen concluded. "While some government programs are more important than others, no expenditure should be considered 'untouchable,' especially in tough economic times. Taxpayers shouldn't be forced to carry the burden of a 'government employee union tax' in an up or a down economy."
NTU is a nonprofit, nonpartisan organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: NTU Issue Brief 169: "Time for States to Cut the 'Government Employee Union Tax'?" is available at www.ntu.org.