Observations on the Method of Annually Adjusting Military Pay

FPCD-78-45: Published: Jun 2, 1978. Publicly Released: Jun 2, 1978.

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In 1967, the principle of providing automatic adjustments in military pay based on increases in federal civilian salaries was established. Since that time, automatic increases in military pay have been indexed to the average percentage increase in General Schedule salaries.

In the military, the automatic adjustment mechanisms result in: (1) understatement of regular military compensation costs in the Department of Defense (DOD) budget; (2) increasing portions of regular military compensation taking the form of tax advantages such as housing, potentially further increasing the visibility of pay to military members; and (3) increasing pay inequalities due to marital status. Portions of regular military compensation are not reflected in the DOD budget, and this absence impedes identification and evaluation of military compensation costs. Because the forms of military compensation are difficult to identify, members often undervalue their regular military compensation. Regular military salary, considered equivalent to civilian salaries, is greater for members with dependents than for single members of the same grade and length of service.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: DOD stated its opposition to changing from a basic pay and allowance to a salary system. At this time, Congress showed no interest in making a major change. Reflecting the value of the tax advantage in the DOD budget is not politically appealing.

    Matter: The House and Senate Armed Services Committees should initiate action to require that military personnel accounts in the DOD budget and individual service budgets reflect the federal income tax advantage of regular military compensation. The military base pay and allowances system should be replaced by a salary system.

 

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