Legislators Balk At Combat-Zone Tax Breaks For Civilians

Legislators Balk At Combat-Zone Tax Breaks For Civilians
December 4th, 2007  
Team Infidel

Topic: Legislators Balk At Combat-Zone Tax Breaks For Civilians

Legislators Balk At Combat-Zone Tax Breaks For Civilians
Washington Post
December 4, 2007
Pg. D4
Federal Diary
By Stephen Barr
An effort to provide a tax break to federal employees serving in combat zones appears to have stalled in Congress, in part because of concern about the potential cost.
Rep. Frank R. Wolf and Sen. John W. Warner, Virginia Republicans, are sponsoring bills that would extend tax exemptions granted to the military to civilian government employees. They see the issue as one of tax parity and fairness because military and civil service personnel often work side by side in Iraq and Afghanistan.
But the proposal would cost $1 billion over 10 years, according to the House Ways and Means Committee. Because of the cost, Democrats and Republicans did not include the Wolf proposal in a recent tax-relief bill for the military and volunteer firefighters that was approved by the committee, aides to Rep. Charles B. Rangel (D-N.Y.), the panel chairman, said.
The Senate Finance Committee also has not included Warner's proposal in a bill providing tax relief and other protections to military personnel. The committee decided the proposal was outside the scope of the Finance Committee legislation "and the cost was expected to be quite high -- the entire military tax bill is just $550 million," a committee aide to Sen. Max Baucus (D-Mont.), the chairman, said.
The cost estimates for providing tax relief to federal employees in combat zones has surprised the bill's supporters, who noted that only a few thousand civil service employees are in combat zones at any time. But an aide to Rangel said the Joint Committee on Taxation and the Congressional Budget Office had based the cost estimate for the House bill on a tally of federal employees abroad in war zones and their types of income.
A spokesman for Warner said his staff hopes to work with the Senate Finance Committee to review the cost estimate, see if it can be reduced and look for a way to get a bill approved before Congress leaves for the year.
Most civil service employees in Iraq and Afghanistan receive their basic salary plus 70 percent in differentials for danger and hardship service. Federal employees can also earn overtime and other types of premium pay. Their salaries and additional payments are taxed.
In contrast, enlisted military personnel and warrant officers in a combat zone have all pay and allowances excluded from their taxable income. The tax exclusion is capped for military officers at $6,867.60 a month. Officers may receive additional, untaxed allowances.
The equity issue, however, is complicated because the military and civil service have different rules for compensating employees in dangerous conditions. A review by the Government Accountability Office, a part of Congress, found that federal employees usually receive higher overall compensation than military personnel in combat zones.
But federal employees serving in Iraq contend that pay and benefits are a separate issue unrelated to the tax code, which requires them to pay full federal income tax.
Warner's spokesman said federal employees should receive some type of tax parity with the military because most are volunteers and it is important to provide incentives that encourage employees with specialized skills to serve in dangerous conditions.

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