State governments have funded less than half of their escalating pension obligations, but it is taxpayers, not the bondholders of government debt or the governments themselves, who are being targeted to make up the shortfall, according to RealClearMarkets.

Citing a recent Moody's analysis, RealClearMarkets reported that the median pension funding of states was only 48 percent of what was needed and that 10 states had pension debt equal to 100 percent or more of their annual revenues.

"The states are in a pure money-grab mode and don't care about policy, the law or fairness," one finance executive told Chief Financial Officer magazine, according to RealClearMarkets.

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In a survey of its readers by the magazine that ranked aggressive tax collection by state, four of the five worst-rated states — California, New York, Illinois and New Jersey — all had "mountains of debt of one form or another," RealClearMarkets said.

"We are seriously going to consider whether we allow employees to travel to or participate in events" in New York, one CEO told Chief Executive magazine. "We can't afford for New York to become a tax nexus for us just because our employees participate in a conference in New York or the like."

RealClearMarkets said some companies trying to decide where to expand or relocate now need to take into account the staggering debts that some states and cities have amassed. It quoted a Chicago Tribune conclusion about the huge pension debt of Illinois: "Companies don't want to buy shares in a phenomenal tax burden that will unfold over the decades."

In 2011, Illinois raised corporate and income taxes by $7 billion but did nothing to reform employee pensions. "Absent reform, about half of the Illinois tax increase simply went into the state's pension system to keep it afloat. Meanwhile, state debt continues to mount," RealClearMarkets noted.

In California, which faces a pension funding shortfall similar to Illinois', the giant state pension fund Calpers raised its rates 50 percent in order to capture a share of recent state tax increases.

A recent "startling" California court ruling made it evident there is apparently no escape from public pension problems there, RCM said. The ruling struck down a voter initiative requiring workers in Pacific Grove to contribute more to their own pensions.

"What is vested in the employee is the right to earn a pension on the terms promised to him or her upon employment," the ruling said, concluding, "no subsequent legislation… can take these rights away once given."

Sen. Orrin Hatch, R-Utah, wants to privatize the public pension problem, The New York Times reported.

Under legislation he wants to introduce, states and cities would exit the pension business and turn it over to life insurers, such as MetLife and Prudential.

"America cannot continue sleepwalking into the financial disaster that awaits us if we do not get the public-pension debt crisis under control," Hatch told The Times. "The problem is getting more serious every day."

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013