Tuesday, January 3, 2017

Your BAH is going away


Yup, you heard me.  The National Defense Authorization passed.  You can read it here:

http://docs.house.gov/billsthisweek/20161128/CRPT-114HRPT-S2943.pdf

Everyone seems focused on the 2.1% pay increase.  I caught this note in the executive summary:

REPORTS ON A NEW SINGLE-SALARY PAY SYSTEM FOR MEMBERS OF THE ARMED FORCES (SEC 604) - Not later than March 1, 2017, the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representative a report that sets forth a plan to implement a new pay system. The new pay structure described shall assume the repeal of the basic allowance for housing and basic allowance subsistence for members of the Armed Forces in favor of a single-salary pay system.




And, if you search the document, here's what you find:

The new pay structure described pursuant to subsection (b)(1) shall assume the repeal of the basic allowance for housing and basic allowance subsistence for members of the Armed Forces in favor of a single-salary pay system, and shall include the following:

(1) A statement of pay comparability with the civilian sector adequate to effectively recruit and retain a high-quality All-Volunteer Force.

(2) The level of pay necessary by grade and years of service to meet pay comparability as described in paragraph (1) in order to recruit and retain a high-quality All-Volunteer Force.

(3) Necessary modifications to the military retirement system, including the retired pay multiplier, to ensure that members of the Armed Forces under the pay structure are situated similarly to where they would otherwise be under the military retirement system that will take effect on January 1, 2018, by reason part I of subtitle D of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 842), and the amendments made by that part.


Done in the name of "retaining the best and brightest..."  Except what it actually does is take away a tax exemption.


So, doing some VERY basic math, you can see what the change is for a few people.  I used dependent BAH in Norfolk, VA.  Now, think about tax brackets, which I pull from the IRS website:

Hmmm, notice anything? The E-6 filing jointly is now on the cusp of the next tax bracket.  Assuming he gets a bonus or something like that, he pops over into the 25% bracket.  An O-3 at 8 years is screwed.  So is a Chief.  This legislation has the effect of pushing almost anyone with over 12 years in the military into, or nearly into, the 25% tax bracket.  

Apparently taxing people at a higher rate encourages retention in the alternate universe that Washington DC operates in.

You should be contacting your Congressman and encouraging them to remove this.  This is a basic assault on your benefits disguised in a "fairness" doctrine.

This post represents the views of the author and not the views of the Department of Defense, Department of the Navy or any other government agency.

4 comments:

  1. Only the income that crosses the threshold is taxed at the higher rate, not the entire income.

    The $71K that the O3 gets today will still be taxed at the same 15% rate it is today.

    And you're assuming the new pay tables won't account for the non-taxed benefits now being taxed. May be a valid assumption, but until OUSD P&R starts working this, it is still just that - an assumption.

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  2. Wow, this is a raw deal. Thanks for sharing.

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  3. So will my retirement check be bigger?

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  4. That's exactly what I was just thinking... HOLY CRAP! My retirement check is actually going to be amazing now!

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