Pay freeze/pay cut/tax hike – then it gets worse!

Looking for something to take your mind off the pending pay freeze extension? If so, consider the prospect of higher taxes, lower take-home pay and higher he...

Like lots of other American workers, feds know they are (again) not going to get a pay raise next year. Congress is set to approve a stopgap spending bill (good through March) that would also block the pay raise during that time. After the two-year pay freeze (2011 and 2012).

Feds in 2013 will face higher health premiums, possibly higher taxes and a reduction in take-home pay if the so-called “tax holiday” on Social Security contributions is ended. And they will do it on the same pay scale they were getting in 2010.

President Obama had proposed a very modest 0.5 percent hike for January. Federal unions have pledged to fight hard to get a retroactive 2013 raise for employees. But that is a long-shot at best.

White-collar federal workers, in most agencies, would continue to get WIG (within-grade) step increases every one, two or three years. Yesterday’s column pointed out that those raises are virtually automatic and not impacted by the pay freeze.

Meantime, unless Congress acts (something it seems to have forgotten how to do) the so-called Bush tax cuts expire in January. Among other things, that would eliminate the lowest (10 percent tax bracket) and boost all the others. Just how much depends on your income, marital status, etc. If the current “Social Security tax holiday” expires, people who pay into Social Security will wind up paying an additional 2 percent more than they do now. It would also eliminate the 2 percent reduction made in Social Security (FICA) payments required of individuals.

Depending on how long they have been in grade, several hundred thousand white-collar workers could be getting WIGs next year. But as some readers noted, that doesn’t include most workers, and the value of the in- grade step increase will be offset by (possibly) higher taxes and almost certainly higher health premiums. Here’s what folks are saying:

Check The Math

Since there are already so many myths out there about federal employees benefits, I just wanted to correct one you have included in your column. You said that each WIGI = 3 percent. That is not true — you can check the math. The increase from step 1 to step 2 is (depending on grade) about 3.3 percent. While the increase from step 9 to step 10 is about 2.6 percent. The amount of the step is determined by a percentage of the step-one pay. Then that same amount is the increase at each step. But since the base amount (what you are making before the step increase) keeps getting larger the actual percentage declines. Again, just get out the pay chart and a calculator. In the D.C. area for a GS-13 step one makes $89,033, the step two make $92,001 (an increase of 3.3 percent). A GS-13 step nine makes $112,774, while a step ten makes $115,742, an increase from step nine of 2.6 percent. The dollar increase in both examples is the same — $2968. Just wanted the info to be correct — 2.6 percent is less than 3 percent.” Dave Bugger

Take Home Pay

“I think we sometimes forget about the reduction in payroll taxes that are taken out for Social Security. I think many have gotten used to living on that 2 percent so that it will seem like a pay cut when it is brought back. So without a pay raise we could face the reinstatement of those taxes, increased retirement contributions and higher health premiums. Not exactly a rosy scenario. — Bruce “tightening belt Fed”

Wigless Feds

I wish I had gotten a 3 percent raise due to a WIG. As an IRS manager we get Performance Based Increases (PBI) since we are paybanded. We don’t get “step” increases or QSIs, just the mystery of the PBI which for the last two years has been 0 percent for a “met” rating. If this freeze goes on long enough, many of my employees will be making more than me.

I have often wondered why we are still on Pay for Performance at IRS when Congress killed NSPS at Defense.

Please keep this anonymous if posted.” — Call me Broke In Texas


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