Time and the financial bottom line are working against a package of attractive bills that would increase most federal workers’ take-home pay and trim the federal tax bite on most federal retirees.
The two plans, one to cut federal-postal worker premiums and the other to cut taxes for federal retirees, seem like a good idea — to federal workers and retirees.
But the costly changes are not so popular beyond the Beltway, or in the congressional committees where federal workers and retirees need all the help they can get.
Both plans would trim federal tax revenues dramatically. That is something the House Ways and Means Committee and Senate Finance Committee — whether steered by Democrats or Republicans — don’t like.
Federal unions, who worked hard (and successfully) to ensure a Democratic majority in the House and Senate, hoped the pay raise and tax cut bills would become law this year. But it appears they were overly optimistic.
Here’s what we’re talking about: The pay raise would come about if the government agreed to pick up a larger share of the total health premium costs of white-collar government workers. Right now, federal agencies pick up an average of 72 percent of their employees’ premiums. That premium-sharing ratio remains the same each year even when premiums go up.
House Majority Leader Steny H. Hoyer, Maryland Democrat, would have the government pay 80 cents of each premium dollar. Although he’s one of the most powerful people on Capitol Hill, and although the bill would benefit members of the House, Senate and their staffs, it continues to languish in committee.
Reason: Its higher cost to taxpayers and the fear of backlash from voters who don’t have generous, lifetime health insurance coverage.
Scheduling most things — especially parochial items dealing with civil service fringes — will be a problem. The Senate still has a dozen appropriations bills to complete. That includes one that would give both federal workers and military personnel a 3.5 percent raise in 2008. President Bush had budgeted for a 3 percent January pay increase. A lot of time will also be taken up in the Iraq debate, which will heat up once a series of progress-or-no-progress reports are made public in September and October.
Item No. 2, the proposed tax break for federal and postal retirees, is also likely to die before it gets to the second and most important congressional hurdles: the House Ways and Means Committee and the Senate Finance Committee.
Again cost is the main issue. Giving a tax break — worth anywhere from $200 to $800 a year — to millions of federal retirees would put a dent in Uncle Sam’s tax revenues.
The other obstacle is lack of interest — based on ignorance — from the federal work force. That’s because active-duty federal workers enjoy the tax break, called Premium Conversion, and most don’t realize it. That is until they retire and lose it before, in many cases, they were aware they had it.
Premium Conversion is the ability to pay the individual’s share of health premiums with pretax dollars. The result is less income reported to the IRS, and therefore lower taxes. The PC perk is automatic for federal workers (unless they decline it). But it is unavailable to feds once they retire.
The bill was introduced by Rep. Thomas M. Davis III, Virginia Republican. It now has 240 co-sponsors (total House membership is 435) but its future — because of its cost — is iffy at best.
Bottom line: Anything can happen in Congress. Even the most unlikely proposals can find a safe haven tucked into a veto-proof appropriation bill. But smart feds and retirees won’t spend the extra money potentially available to them until Congress acts and the president signs on the dotted line.
Mike Causey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or mcausey @federalnewsradio.com.
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