One of the unforeseen consequences of the Republican tax reform bill will be to increase pressure on state and local unions to soften their half-century opposition to school choice. To be sure, this would be a remarkable reversal for public labor. But the emerging incentive is a powerful one: The modest subsidy of public school alternatives is now the only way to both rescue government public pension plans — the cumulative underfunding of which has been estimated as high as $6 trillion — and thus keep promised benefits reasonably intact.
For decades, union leaders and their political allies have tacitly placed their hopes for salvaging troubled pensions on tax increases. The assumption was that, like it or not, voters would have to cover any shortfall. But, as MIT economist Robert Pozen has argued, the recent loss of deductibility for city and state taxes has severely limited that option. This especially relevant in blue states where adequate pension funding would require tax increases of anywhere from 14 percent in Connecticut to 26 percent in New Jersey.
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