Would tax breaks for armed service members increase enlistment?

[MattC]

A major problem with recruiting for the armed services is the economic disadvantages for the middle and upper classes, but the economic advantages for lower middle class and lower class members.  To the latter, there are opportunities for further education and good pay.  For the former, it means years out of the workforce--which can have high opportunity costs in regards to promotion salaries.  This drastically limits the number of people who consider enlisting.

What if your federal taxes were decreased by 25% if you served in the armed forces (unless dishonorably discharged)?  I do not know how feasible that is given the current overspending in Washington, however I think it would rapidly raise enlistment.  The tax benefits could quickly offset the decreased salary.  How long should the break last, however?  It would have to extend at least a decade beyond the end of service, I assume, in order to be attractive enough.  Would it be too much if it was a life-long reduction in taxes?

[Car Knocker]

Any increase of the tax break for re-enlistments?  How much would you be willing to pay in increased taxes to fund this proposal?

[MattC]

Car Knocker, an increase in taxes to cover the losses in tax revenue is likely, and is part of why I included the sentence above that reads: "I do not know how feasible that is given the current overspending in Washington, however I think it would rapidly raise enlistment."  There is no single fix, and 25% is unlikely to be a good amount to set it at.  It would take a lot of research, and would be most effective with a cut in superfluous governmental spending, to settle on a proper percentage.

Your question about re-enlistments is good.  Off the cuff, I answer that it would work best as a single discount, not increased for re-enlistment.  Perhaps an increasing scale for time in service.  But increased benefits for re-enlistment encourages repeated leaving and then returning--an adverse incentive that would decrease stability and increase the costs of operation.

But what are your opinions about would it increase enrollment, especially from the underrepresented economic classes?  And what do you think would be a reasonable length of time to extend the tax reduction?

[The Rabbi]

There are a huge number of fallacies in the original post.  THe first is that the problem with recruitment is the lack of participation by middle and upper middle class people.  It is not a problem.  It doesnt even exist.  Many new officers are in fact middle class people who used ROTC to pay for college.  Others are West Point and other academy grads.  They are not generally working-class people.  And if they are, by the time the finish they are mostly indistinguishable from middle class people in terms of education (actually probably distinguishable by having a better education).  The military has always drawn people from lower segments of society.  A tax break wont change that.
Further, people from advantaged backgrounds join the military out of a sense of duty.  Giving them a tax break won't affect that.

[Gewehr98]

Not commonly known, but they do get a tax break, of sorts.  Re-enlist while serving in a combat zone, and your bonus is tax-free. If you spend the majority of the month in the combat zone, your base pay and entitlements are also tax-free.  I know of a young E-5 couple, each in the 3C0X1 AFSC who re-upped for 6 years each, and each had a "3" Selective Re-enlistment Bonus, or SRB.  That's 3x your base pay for the number of years you re-enlist for.  Each of them got $43K for their re-enlistment bonus, and since they were savvy enough to re-up in the combat zone, all $43K was theirs, vs. giving a quarter or more of it back to Uncle Sam.  That's $86,000 between the two of them, and they were in their mid 20s, so they still had their Zone B and Zone C bonuses to look forwards to, if they planned on making a career of it.  (And assuming the bonus rates stay the same) The law prohibits single bonuses exceeding $60K.

A lot of my pay was tax free, depending on how much of a given month was spent in a designated combat zone.  It's called the Combat-Pay Exclusion, and I'd wager the Army, Navy, Marine Corps, and Coast Guard have similar exclusions. 

[MattC]

Rabbi, must admit that my opening statement is based on newspaper articles that I have read an not actual survey data of economic class status prior to enlistment.  I do appreciate you drawing my attention to a possible overstatement.  I am not convinced, however, that there is a balance between enlisted people who started in the upper middle or upper economic classes and those who started in the lower middle or lower economic classes.  The anecdotal situations that I have encountered suggest otherwise.  Does anyone have some actual data on this that could show my instigating thought is unfounded?

If it is, or even if it is not, then let's consider the question posed differently.  The US Government has stated that it is strapped for soldiers and is trying to boost recruitment rates.  Would these tax breaks provide them with the relief they desire?

Rabbi, you suggested that those who join the military do so out of a sense of duty.  I contend that there are several factors that enter into the decision to enlist, duty being one of them.  Do you think enlistment would increase if people had less cause for economic concerns to outweigh a sense of military duty?

I do have a bit of a problem with the "huge number of fallacies" statement, however.  I made 5 assertions:
(1) "A major problem with recruiting for the armed services is the economic disadvantages for the middle and upper classes, but the economic advantages for lower middle class and lower class members."
(2) "To the latter, there are opportunities for further education and good pay."
(3) "For the former, it means years out of the workforce--which can have high opportunity costs in regards to promotion salaries."
(4) "This drastically limits the number of people who consider enlisting."
(5) "The tax benefits could quickly offset the decreased salary."

If "major problem" in 1 is fallacious, then 4 is as well.  However, 2, 3, and 5 stand independently.  Did you find problems with 2, 3, and 5?

Gewehr98, thank you for cluing me in to the tax benefits already in place.  I had no idea.

[wmenorr67]

The combat zone tax exclusion is in place to our entire military and even to selected civilian employees up to a certain dollar amount.  And to get the break all you have to do is spend one day in an area covered by the CZTE, and that months wages is tax free.  You still pay FICA and SS, the break is on income tax.  Most states also take part in this benifit.

[Lennyjoe]

The tax benefits Gewehr98 mentioned are in fact true.  

On the other hand, us military folks pay taxes just like everyone else (unless we are in a combat zone). Only difference is, our taxes go towards paying a small part of our own wages.  How many of you folks are doing the same?  

[K Frame]

The tax benefits Gewehr98 mentioned are in fact true.  

On the other hand, us military folks pay taxes just like everyone else (unless we are in a combat zone). Only difference is, our taxes go towards paying a small part of our own wages.  How many of you folks are doing the same?  

Me.

I work for a government contractor providing software solutions to the Air Force.

[Moondoggie]

The news reports I've heard in the past few months said that the Marine Corps and one other branch (I disremember which one) were having no problems meeting their recruiting goals.

I don't think tax breaks would entice many to enlist.  Most junior enlisteds don't make enough money for a tax break of any kind to amount to much.  Enlistment bonuses do work, as do re-enlistment bonuses.  The services manage those $ carefully to maintain the manning levels in various job specialties.

Gewher and Lennyjoe may be in for a pleasant surprise....for all of their yrs of service the DOD was paying an extra 1/3 above the normal contribution to SS.  Bumps your SS benefits quite a bit...if we ever actually get to collect any.  That got my attention during my seps briefings.

[Sergeant Bob]

Gewher and Lennyjoe may be in for a pleasant surprise....for all of their yrs of service the DOD was paying an extra 1/3 above the normal contribution to SS.  Bumps your SS benefits quite a bit...if we ever actually get to collect any.  That got my attention during my seps briefings.

So is Sgt Bob, MSgt, USAF Retired! Most of my surprises lately have sucked.

[Telperion]

I believe the military still doesn't offer matching in their TSP, which is given to civilian federal employees and is fairly common in the private sector.

[Headless Thompson Gunner]

I would enlist in exchange for the promise of never again having to pay income taxes.  It'd be a bargain, both for me and for the services.

Brilliant idea!  Now you just have to sell it to the bigwigs in Washington.

[BobR]

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Quote from: Moondoggie on Today at 03:28:21 PM

Gewher and Lennyjoe may be in for a pleasant surprise....for all of their yrs of service the DOD was paying an extra 1/3 above the normal contribution to SS.  Bumps your SS benefits quite a bit...if we ever actually get to collect any.  That got my attention during my seps briefings.

So is Sgt Bob, MSgt, USAF Retired! Most of my surprises lately have sucked.

Here is the page that tells about it.  http://www.socialsecurity.gov/retire2/military.htm

Here is a small part of it.

Note: Change in special military service credits.
In January 2002, Public Law 107-117, the Defense Appropriations Act, stopped the special extra earnings that have been credited to military service personnel. Military service in calendar year 2002 and future years no longer qualifies for these special extra earnings.

So, be sure to check with your SS office to ensure you get the proper credits.

bob

[wmenorr67]

The military was told that they are supposed to start some sort of program to match TSP.  However the DOD has balked crying that the money is not available.  Not holding my breath.

[The Rabbi]

"Huge number of fallacies" was probably an overstatement.
But there is a basic fallacy that a) upper and middle class people dont serve in the military, and b) that if their service is underrepresented by thei general numbers in society that this is a problem.  I think they are probably under-represented.  I also dont think it makes much difference, except to class warriors trying to score political points one way or another.

[mountainclmbr]

Most lower income people don't pay Federal Income Taxes anyway. A 25% reduction of $0.00 is not much of an incentive. I wish I could change the block on the 1040 income tax form from "fund the presidential election" and make it say "additional pay for servicemen in combat positions".

[Sergeant Bob]

The military was told that they are supposed to start some sort of program to match TSP.  However the DOD has balked crying that the money is not available.  Not holding my breath.

Probably another unfunded mandate.