Gubmints has been on the road making the world safe for democracy.
In the meantime, I still have not seen any detailed financial analysis of the effects of sequestration on the federal employee.
However, here is a decent guide from the Washington Post regarding compensation and job security for federal employees under sequestration.
*** Updated 1/2/2013 with the ‘Fiscal Cliff Deal‘, updates in italics ***
Cliff Deal Notes (Part Two) –
As promised, I’ve run the numbers on what the Fiscal Cliff (aka Sequestration, aka Taxmageddon) will cost Joe and Jane Sixpack.
There’s no chance of a deal being worked out by the lame duck Congress. Both sides are too far apart and there are too few work days left in the year. If you disagree with me, then I’ve got some arid mountain land to sell you in Florida. (Update 1/2/2013, I was right about the Year, but wrong about the lame duck congress not making a deal before the new congress being sworn in).
So it’s time to brace for impact. Crunching the numbers as promised, here are the assumptions:
- Mid-grade Federal Employee, married w/2 kids, living on the West Coast or an expensive area like Washington DC (this covers over half of active Federal Employees).
- Itemized deductions of $31,000 (reasonable assumption for areas with expensive mortgages).
- 4 exemptions claimed
- Annual Long Term Capital Gains of $8000.
- Annual Qualified Dividends of $2600.
- Health Care Flex Spending Account election of $5,000 in 2012 (capped at $2,500 in 2013).
Here are the calculations:
Holy Schnikes! Looks like I’ll be paying Uncle Sam another
$4k $3k next year for the same amount of work. Note that these calculations can apply to just about anyone in the current 25% marginal bracket- just knock of the anticipated 0.4 percent hike in FERS annuity contributions. (1/1/2013 Update Notes: still plenty of uncertainty about FERS contributions, still some uncertainty with the Executive Order-ed 0.5 percent pay increase for federal employees).
Feel free to
plug in your own numbers plug in the new numbers to see how the ‘Fiscal Cliff Deal’ Sequestration will affect you. Enjoy!
Subscribe to GubMints:
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
||Increased Marginal Rate of 2%
|Expiration of Bush Tax Cuts – LT Capital Gains
||LT Capital Gains - 15%
||Increase on LTCG of 5%
|Expiration of Bush Tax Cuts – Dividends
||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
||Increased withholding of 0.4% of wages
|FEHB Increase of 3.7%
||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!
Subscribe to GubMints: