“Pension Smoothing” Helps Feds, Corporations Avoid Reality for Just a Little While Longer

The Washington Post
reports on how “pension smoothing,” an accounting gimmick
that’s part of the recently passed Highway and Transportation Act
of 2014, allows both the feds and the companies that pay the gas
tax to avoid reality for just a little while longer.

The law allows companies to put off otherwise mandatory
contributions to their defined-benefit employee pension funds,
which increases tax revenue for the Treasury, since those
contributions would have been tax-deductible. Actually, smoothing
increases tax revenue in the short run but decreases it later on,
when companies have to make up for the missed payments. But dollars
gained exceed dollars lost over the 10-year interval within which
Congress, somewhat artificially, calculates the fiscal impact of
its policies, so lawmakers can claim that the bill doesn’t increase
the deficit.

Meanwhile, pension plans will be underfunded, exposing the
federal pension insurance fund, and the taxpayers who ultimately
back it, to greater risk. But who cares about that. For the big
companies that lobbied in favor of pension smoothing, the money
saved by skipping pension contributions outweighs the cost of
losing the tax deduction….

The…problem is the dysfunction of a federal government reduced
to running one of its major infrastructure programs on a
year-to-year basis, held together with the budgetary equivalent of
chewing gum and bailing wire.

Read the whole thing.

Hat tip: Twitter feed of Mercatus Center’s Eileen Norcross.

The highway bill shells out over $10 billion a year for
infrastructure projects. Last month, Reason Foundation
transportation guru Robert W. Poole
explained why the Highway Trust Fund was running out of money
and why there was no way that a gas-tax increase was up to the task
of repairing the nation’s highways, bridges, and the like. Poole
argues that when it comes to the interstate system—which needs
something on the order of $1 trillion in repairs and expansion to
meet current traffic needs—the only way to go is with a “true user
fee” in the form of tolls. Controversial? Yes. Compelling?
Also yes.