There has been a lot of jibber-jabber about the effects of the federal budget sequestration ‘Fiscal Cliff‘, aka ‘Taxmageddon’, but to date I have found very little detailed anaylysis regarding its effect on the Federal Employee. So here goes…
I’m disappointed that NARFE or one of the government employee unions has yet to present a comprehensive, detailed breakdown of how all the proposed laws/orders will directly affect the Federal Employee’s wallet. In their defense, there is a mishmash of laws, proposed bills, and executive orders to sift through. If you’re a Govvie, give thanks that you’re not a defense contractor waiting for a layoff notice that may or may not come due to the muddied interpretations of the WARN act.
Sorry, Back to the topic. I’m not an attorney or CPA, but in the interest of my own wallet, here’s how I see the proposals affecting a mid-career Federal Employee in 2013. Note that most of these proposals hit Mr. and Mrs. Joe and Jane Sixpack in the private sector as well:
Tax Cuts – Marginal Rate
|25% (MFJ)||27% (MFJ)||Increased Marginal Rate of 2%|
|Expiration of Bush Tax Cuts – LT Capital Gains||LT Capital Gains - 15%||20.00%||Increase on LTCG of 5%|
|Expiration of Bush Tax Cuts – Dividends||15.00%||20.00%||Increase on Dividends of 5%|
of Payroll Tax Holiday
|4.2% of wages under $110K||6.2% of wages under $110K||Increase of 2% on first $110K of wages|
|No Change||No Change||No Change|
|0.00%||0.40%||Increased withholding of 0.4% of wages|
|FEHB Increase of 3.7%||Status quo||Avg. Premium increase of 3.7%||Increased FEHB premium by 3.7%|
|ObamaCare 50% cut to Medical FSA||FSA Limit of $5,000||FSA Limit of $2,500||An additional $2500 in wages potentially taxed.|
(Update 12/1/2012) Stay Tuned for Part Two!
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