Organizations representing 17 million federal, state and local government workers are looking for a Republican angel on the Senate Finance Committee to help block a proposed change in pension tax rules.
The change, already approved by the House, would eliminate the tax-free period after retirement now enjoyed by persons who contribute to their own pension plans. The Senate committee is working on its version of tax reform now.
Federal employe groups think they can get at least one committee Democrat among Sens. David L. Boren (Okla.), Bill Bradley (N.J.), George J. Mitchell (Maine) or David H. Pryor (Ark.) to propose an amendment to kill off the pension tax change.
But they need someone from the majority Republican side to cosponsor the proposal in committee. Among those being courted are Sens. John H. Chafee (R.I.), David Durenberger (Minn.), John C. Danforth (Mo.) and William L. Armstrong (Colo.).
All either come from states with sizable public employe populations or are concerned about the disruptive effects the tax change could mean for the career civil service.
The House plan would eliminate the benefit for persons retiring after July 1. The Senate committee is considering a proposal that would do the same thing by January 1988.
Under current tax rules, the benefits of persons who contributed to their pension plans (and paid taxes on those contributions) aren't subject to federal tax until all the contributions are recovered as pension benefits.
For most federal workers that recovery period lasts about 18 months. The House bill would subject a portion of annuities to federal taxes, starting July 1.
The Federal Government Service Task Force says the change would mean a $10,000 tax bite in the first three years of retirement for the typical civil servant, and up to $30,000 for higher-paid executives.
Government agencies have warned of a massive retirement exodus and "brain drain" of longtime employes if the provision becomes law. The government estimates that 200,000 of its 2.6 million workers are eligible to retire.
Although the issue is billed as a civil service one in federally dominated Washington, the fact is that most of the people who would be hit by the change are state and local government workers, schoolteachers and private sector employes who contribute to their own pension plans.
Federal and postal groups -- led by the Senior Executives Association, the National Association of Letter Carriers and the Federal Executive and Professional Association -- have been trying to enlist lobbying support from state and local government organizations to convince Congress that this is more than a federal employe issue.
The committe estimates that the tax change could bring in an additional $8 billion in revenue in the first three years. That is a persuasive argument to the budget-conscious Congress.
But opponents hope to show that any savings could be more than offset in reduced morale, and loss of key scientists, engineers and technicians from the CIA, National Aeronautics and Space Administration, FBI, IRS and other agencies. Meeting
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