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:

Law/Bill/Order

2012 Status

2013 Status

Effect

Expiration
of Bush
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%
Expiration
of Payroll Tax Holiday
4.2% of wages under $110K 6.2% of wages under $110K Increase of 2% on first $110K of wages
Federal Pay
Freeze
No Change No Change No Change
Increase FERS
Annuity Witholding
0.00% 0.40% Increased withholding of 0.4% of wages
Non-sequestration effects:
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.

My goal for Part Two of the analysis is to provide a detailed breakdown like the Bush Tax Cut analysis shown here:

(Update 12/1/2012) Stay Tuned for Part Two!

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One thought on “Fiscal Cliff Notes – How Taxmageddon hits the Federal Employee (part one)

  1. Pingback: Fiscal Cliff Diving - Sequestration will cost you around $4,000 | GubMints

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