Should all retention bonuses be tax-free?

I think that enlistment/reenlistment bonuses should be tax free, but should have their values adjusted to reflect what Congress was willing to give you in the first place. If it's $30k you take home, than it should be a $30k bonus that isn't taxed. There's a psychological element to this. You are agreeing to put your life on the line or keep it there, and the system isn't being up front with you. I find it to be bogus.

Then again, I also think the whole part of taking income tax out of our paychecks to be odd to start with. Federal income tax pays my salary, but I also pay said tax. It seems like circular logic to me.

One small, but important correction SGM. The current tax rate for bonuses is not 3% less than regular income for most Soldiers. Even with a 40K bonus, a Soldier would have to be an E-7 over 16 years of service or an E-8 over 12 yrs TIS to be taxed at 28% on their basic pay. To say that it is 3% less than regular income suggests that it already receives at least some kind of discount when it does not, based on current federal tax brackets.

Absolutely What good does it do when you are given a nice fat retention bonus and a fourth of it goes to Uncle for some weapon system that cost to much? That money was yours to spend or save and he takes it from you! Totally unfair!

It does make a difference. I seen several people who were adamant about getting out change their minds when we entered the official war zone and the Reenlistment bonus suddenly became tax free.

Yes. Full stop.

yes,

Absolutely. All reenlistment and retention bonuses should be tax free.

Bonus should be taxed at the same rate as normal salary. Taxed too high, the value of the bonus is weakened. Taxed too low, it becomes a tax dodge.