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Tax Cut Triggers In-House Civil War
Tuesday - 12/14/2010, 4:00am EST
Has the proposed Social Security tax cut triggered a mini-civil war in your office?
Is there a workplace chill between older workers under the old Civil Service Retirement System who wouldn't get any tax break, and their younger colleagues in the Federal Employees Retirement System who would benefit?
Most of the federal workforce is covered by the FERS plan. But roughly half a million long-time feds are in the older CSRS program. They pay the Medicare tax but do not contribute to Social Security.
As proposed by the President, people who pay into Social Security (which is most American workers) would have their payroll tax cut by 2 percentage points next year. The idea is that the temporary cut would put more money in people's pockets and they would spend more and stimulate the economy.
The two percent "raise" is a big deal to lots of people. Congress will almost certainly approve a 2-year federal pay freeze proposed by the White House, although military personnel are in line for a 1.4 percent raise in January.
Federal health insurance premiums are going up an average of 7 percent next month. That will be especially tough for retirees who didn't get a cost of living adjustment this year, and who won't get a COLA in 2011.
We've been flooded with e-mails from CSRS employees (mostly wondering why they aren't getting a tax break) and from FERS employees (mostly wondering why the CSRS types are complaining.) For example:
- "Most of your complainers (in this retirement system class warfare) seem to be ignorant of the fact that there are no Social Security caches of funds or CSRS/FERS caches of funds. It is all just a paper trail funded now and in the future with Chinese borrowing. These trust funds are in the same shape; they will last as long as the government can borrow funds." Gary in Arkansas
- "As a CSRS employee I'm less disturbed about missing out on the 2% FICA cut as I am about the effect on the Social Security trust fund. Every few years isn't there a big panic about the Trust Fund going broke in 'x' number of years? So I guess they figure they might as well hurry it along. Brilliant. Why not just eliminate the FICA altogether. That would give most folks more like a 6% paycheck increase, and then we could close down Social Security and save all that money. Sheesh!" Nick with Social Security
- "Well..at first look I thought here it goes again, putting the old 1, 2 to the Federal Employee. But upon my 2nd and 3rd look I see where the FERS employee may, just may I say, get one up on the CSRS employee. I can't tell you how may times a CSRS employee retires and says to me, a FERS employee, how much better their retirement system is. And it is much better than FERS, a system that doesn't count on Social Security or a 401K, better known as TSP, to help you get close, just close to what that CSRS employee gets.
"The CSRS employee hasn't paid into the Social Security system for all the years they have been employed. Now they want that 2% cut back. Well on one hand I feel for them but my pocketbook and food pantry say something else indeed!!
"When they receive that 4% COLA raise at some point or even the 5.8% they received in 2009, FERS retirees received 1/2 of that pay increase....ONE HALF!!!! So Mike you think they would give us the other half COLA....I think not. Sometimes what goes around comes around and this my dear friend is one of those times.
"I really do not like to go against my fellow Federal Worker, but this time my pocketbook is a bit light and I must do what I must do!!!!!! Thanks as always for keeping us lowly Federal Workers updated with the news of the HILL!!!! " Craig in West BG Virginia
- "BooHoo... I'm a FERS employee and would trade systems with any Fed. worker under CSRS. I'd love to pay no Social Security Tax, not have to worry about TSP performance, retire at 55, and get 80% of my salary when I do. --Are you kidding me? Maybe all the CSRS employees should just retire before Jan 1 anyway." Rich O. of the IRS
- " Well Mike since you asked....
"Those CSRS Folks who are 'upset' need to admit the reality that they don't pay SS so they don't get the reduction. THAT IS fair.