Obama's federal worker 'tax'

@CNNMoney September 20, 2011: 4:04 PM ET

WASHINGTON (CNNMoney) -- Union groups for federal employees don't like a piece of President Obama's plan to cut $3 trillion from deficits over the next decade -- the one that has all federal workers contributing more to their pensions.

President Obama's proposal would call on all federal employees to contribute 2% of their paycheck into their pension benefits, more than double the current 0.8%. The proposal would phase in the hikes for workers starting in 2013.

For a worker earning $47,500, the Obama plan means $570 less brought home each year.

For the federal government, the move would trim $21 billion from deficits over the next decade.

In his Monday speech, Obama called it a "modest adjustment," adding he was asking "everybody to do their part so that no one has to bear too much of the burden on their own."

But for federal workers, who have not seen a pay hike in two years, it's adding insult to injury. They see the move as a tax increase.

Anti-tax Republicans in the House have offered similar proposals that cut deeper into employee-take-home pay, by shifting even more of the cost of federal benefits to federal employees.

Unions are fighting those efforts too.

"Why would we be required under the president's plan to pay an additional 1.2 percent payroll tax to a retirement system that is fully funded?" asked National Active and Retired Federal Employees Association President Joseph Beaudoin in a statement.

And Colleen Kelley, president of the National Treasury Employees Union, said that such cuts to federal benefits will make it tougher to attract and keep the best workers.

Obama unveils $3 trillion in debt cuts

"Over time, I believe continually targeting the federal workforce for cuts will impact the government's ability to attract and retain the caliber of professionals required to carry out the critical work of our country," Kelley said.

The hike would mean that federal employees who work at a range of companies from the Postal Service to the Federal Housing Administration to the CIA would all have to contribute 2% of their salary to their pensions.

The Obama administration is also proposing a new annual fee of $200 for military families who qualify for health care retirement benefits, when they reach age 65 and tap Medicare. Currently, military Medicare recipients pay no such annual fees. The move would trim $6.7 billion from deficits over the next 10 years.

They also proposed hiking co-payments on some drugs for retired military, while eliminating co-pays for generic mail-order drugs -- a move that would trim $20.6 billion from federal budgets.

But groups representing veterans pushed back on the moves.

"Our nation's financial situation cannot be solved by breaking faith with those who single handedly fight our nation's wars -- be it today or tomorrow," Richard L. DeNoyer, the commander-in-chief for the Veterans of Foreign Wars of the U.S., which represents 2 million veterans. To top of page

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