While I was a nuclear submarine officer, I was teaching at a military school for my last few years of active-duty service, so I wasn’t receiving any sea pay or the like, nor was I receiving the nuclear retention bonus because I was planning on getting out of the service. If I had been serving on a submarine instead of teaching (and receiving all of those additional incentives and bonuses) I would have been making about $20K more than the $70K I was grossing in 2002.
I was actually not counting any pay other than what any other active-duty O-3 (Army Captain or Navy Lieutenant) was getting who lived in my area. This included my base pay, housing allowance (which took into account the cost of housing in my area of the country), and Basic Allowance for Subsistence (BAS). The latter two made up about one-third of my gross pay, and were not counted as taxable income. Note that the housing allowance is increased if you have any dependents, such as a spouse.
In 2010, an O-3 (whether Army, Navy, Air Force, or Marine) with 8 years of service grosses about $65K in base pay, and $25K in untaxed housing allowance and BAS (in this part of the country), for a total of $90K not counting any other incentive pay, sea pay, sub pay, etc. As I stated pay has increased by a larger amount than inflation. Military base pay was increased by 3.4% this year over last year, for instance.