Cost Savings of Taxing Lower-Ranking, Non-Dependent Members Basic Allowance for Housing for Collocated Military Couples

Abstract

The U.S. federal deficit continues to grow yearly and is approximately $1.719 trillion for fiscal year (FY) 2022, further increasing the national debt to approximately $31.1 trillion. Our research examines possible cost-saving measures available within the Basic Allowance for Housing (BAH) program, specifically a tax on the BAH of the lower-ranking, non-dependent service members within military collocated couples. We utilized data from the Defense Manpower Data Center (DMDC) to define the population data for all military collocated couples for June 2022. Of the approximate $25.6 billion in BAH paid to service members in FY22, our estimates indicate approximately $1.25 billion is paid to the lower-ranking, non-dependent members of collocated military couples. Additionally, our estimates indicate that officers would pay a 15% higher amount in tax paid than enlisted. Our analysis suggests that potential cost savings of approximately $284.5 million annually can be achieved by instituting a tax on these members’ BAH allowances plus their base pay at a tax rate commensurate with the total of both. An alternative approach provides a cost savings of approximately $151.4 million annually attained by taxing only these service members’ BAH at a tax rate commensurate with the total of the BAH alone.