Taxation of COLA
Overseas COLA is a non-taxable allowance. Stateside COLA, however, is taxed. To offset these taxes, these COLA rates incorporate an 18% increase to cover the average income tax.
Read more about this topic: Cost Of Living Allowance (U.S. Military)
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“The Government is able to afford a suitable army and a suitable navy. It may maintain them without the slightest danger to the Republic or the cause of free institutions, and fear of additional taxation ought not to change a proper policy in this regard.”
—William Howard Taft (1857–1930)