Combat Pay or Special Combat Pay

There have been different types of compensation packages recommended for military works.

Certain military compensation analysts have strongly recommended for across the board pay hike rather than a selective pay rise.

The percentage increase in salary is targeted for a particular pay grade for several years of service where special pay and bonuses are given for particular occupational skills.
 
There are many components of the military compensation system which are important to the recruiting and retention efforts that do not involve cash payments.

The recruiting and retention problem in such services cannot be solved just by increasing the pay package.

There has been a wide range of areas like health, housing, moving costs, exchanges, commissaries, and other retail and recreational facilities that should be addressed and regulated.

Studies claim that the sense of patriotism and public service can be developed by offering certain special combat pay for combat-ready armed forces.

The standards philosophy of the Department of Defence for compensation is to increase wages with increased danger or risk. 

History of military compensation 

There are two components of the compensation HFP / IDP and Combat Zone Tax Exclusions (CZTE), which are distributed very differently among the service people. 

• Hostile Fire/Imminent Danger Pay (HFP/IDP). - The badge pay for combat infantry was given for combat risks in World War II which were designed to boost flagging infantry morale.

• Badge pay was given only to the infantry and once awarded the infantryman would continue to get the compensation until the entitlement was curtailed (in 1949). 

• Similarly, income was given to servicemen deployed in Korea (1952), and it represented the first modern form of direct compact compensation.

• In the year advanced pay was awarded to a member serving at least 6 days in such units or those who were injured or wounded or killed in hostile fire.

• In 1963, the term of such benefit expired and the Korean armistice was reauthorized.

• Decades after this, the Vietnam War had the policy of zonal eligibility where in the absence of major conflict, the department issued new designations in the 1970s and 80s.

• The Vietnam Combat Zone continued long after the operations concluded where the main aim was to ensure the prisoners of war or members of the missing in action to get the benefit until the POWs were released in 1996. 

•  Identical recognition was given to the deployments in Afghanistan and Athens, while, there existed different hazards and hardships in such deployments.  

• The Balkans' situations, mainly, were about NATO peacekeeping and there was political reluctance to create a combat zone for it. Later Kosovo and Afghanistan zone was established that supported operations in the Middle East & Asian countries. 

• Each year the members deployed in such areas, the person becomes eligible to exclude from federal income tax the total income received, if he/she is an enlisted member up to $7,714.80, or upper limit to get the benefit. 

The actual value depends on the factors – 

• Income tax scale, family / spousal income, and marginal tax rates. Greater the spousal income higher is the CZTE.

• Larger the family, greater is the exemptions.

• Deductions, additional income, and other tax variables, credits should be considered to calculate an individual’s benefit.

• If the time spent on such deployment is greater, the benefit is more. 

Administration 

• Income exclusion as a result of such deployment affects not only the income but also creates liability for a variety of federal and state programs, while, the major benefit program for the military person is the EIC, which is taken to determine the value of the CZTE. 

• Distribution of the filed number of months of deployment across the tax year has a direct impact on the amount, and the lower-income groups have higher EIC benefits.

• The termination of such benefits requires an executive order or a provision of law and the benefits are dependent on the distinction between the termination of the combat zone and termination of benefits. 

• Also, there is a special provision for a refundable tax credit for low wage earners and their families. 

Currently, income exclusion due to deployment in such areas can reduce taxable income by over $91K in the current or the next financial year depending on the personal tax year dates.