What Tax Cuts Mean for Federal Employees in 2018

In late 2017, Congress passed a sweeping reform bill that gives tax cuts to many but leaves others uncertain. While both congressional representatives and the President have said this bill will benefit the majority of Americans, there may be changes ahead for federal employees, both in their income and employment.

While it’s still unclear how the new tax law will affect federal workers, experts have a general idea of what’s ahead based on this administration’s behavior. Here are a few factors to consider when budgeting for 2018 and what you can expect within your department because of the tax cuts.

Cuts to Federal Spending Will Affect Certain Departments

In order for the tax bill to pass, members of Congress had to cut the federal budget to balance the national deficit. The goal for both Republicans and Democrats was to prevent the national debt from growing, and cuts needed to be made as a way to give back to American citizens.

While most private citizens are happy about this news, it means that multiple federal departments will lose funding or see dramatic reductions in their budgets this year.

The New York Times created a useful interactive graphic explaining the effects of the tax cuts on various government programs. While Medicare receives the biggest cuts, other branches like the Bureau of Consumer Financial Protections or the Farm Security and Rural Investment Programs don’t escape unscathed.

These funding cuts don’t necessarily relate to employment. The numbers might seem large, but some of the budget cuts might only be a small part of an agency’s annual spend. Furthermore, many programs will likely try to keep their employees and find other ways to account for the decrease in funding. Despite these cautions and good intentions, some departments might have no choice but to reduce their workforce.

The Administration Already Plans to Eliminate Redundancies

While budget cuts don’t necessarily mean a reduction in force (RIF) will happen in your department or even agency, it wouldn’t be surprising giving the current administration’s goals. The President has stated multiple times that he wants to make government offices more efficient and reduce redundant positions.

In early September, many government agencies worked closely with the Office of Personnel Management to determine what employees they could afford to keep with their projected budgets or if a reduction in force was necessary.

Departments looked for positions with multiple employees or inefficient organizational charts that hindered an agency’s management. Then in early December, the OPM approved buyout increases for federal employees, meaning employers were able to offer better early-retirement options or higher payments for employees to leave their positions. Programs that did need a RIF could help employees leave on good terms with their government employers.  

If there are any upcoming RIFs because of the recently approved tax cuts, then employers will likely start with employees who are closer to retirement or who are looking to leave so they can benefit financially from these recent approvals or have a cushion while they look for work.  

The IRS Will Likely See a Budget Increase to Implement the Tax Cuts

Not all government agencies will experience cuts because of the recent tax reform. The Internal Revenue Service, in particular, says it will need an additional half-billion dollars to implement the new tax cuts and help Americans file their taxes. This funding is expected to last over the next two years at least as IRS employees work to better understand the new tax law.

According to USA Today, the additional funding will be used for:

• Programming and system updates
• Answering phone calls
• Drafting and publishing new tax forms
• Revising regulations and guidance
• Training employees
• Developing ways to verify compliance and identify fraud

These tasks encompass a variety of job duties. As Americans file their taxes, they will need additional help because of these changes. Without IRS employees to answer calls, provide guidance, and program the system to catch mistakes, people are likely to submit completely inaccurate tax forms. Naturally, this work builds on itself. If people make mistakes because they don’t have the resources to file their taxes then IRS employees will have more work sorting through the errors. The IRS is likely to increase its staff to cover the tax reform transition.

Ride Out the Changes Confidently With Financial Security

Most federal employees don’t need to be concerned about whether the recent tax cuts will affect their employment. In fact, they might see an increase in their take-home pay or tax refund because of them.

However, if you are concerned about the recent reforms and want to make sure you’re in a financial situation that can handle any unplanned events, contact MyFedBenefits. We can pair you with a specialist within your state that understands your exact situation. You can work with us to review your benefit options to make sure you’re getting the most from your government employment. Find a benefits specialist today.