Thousands of former federal workers and other persons retired on disability could get a reprieve from the big 1976 tax bite they now face under legislation planned by Sen. Robert Dole (R-Kan.) and Rep. Robert W. Daniel Jr. (R-Va.).
The Dole-Daniel bill would delay until Jan. 1, 1977, inplementation of the law that wipes out the $100 a week sick pay tax exclusion break for most retirees. Under the tax reform act passed last year by Congress, the tax exclusion for sick or disability payment was eliminated retroactive to Jan. 1, 1976.
That means that retirees who had not expected to have to pay taxes on a portion (up to $5,200 a year) of their sick or disability pay are now liable for taxes on all money received unless they can prove their disabilities are total and permanent.
Elimination of the tax break as of Jan. 1, 1976 would hit federal retirees hardest because many of them - thanks to the government's liberal policy of granting retirement for "total" disability - now will be required to pay taxes on all disability pay received.
Under the plan by Dole and Daniel, which has garnered some bipartisan support in the House, the tax law would not be changed. And the tax exclusion would be eliminated for persons who are only partially disabled. But the bill they are pushing would give those retirees a break for the 1976 year.
The Dole-Daniel proposal would merely changes the effective date for ending the sick pay tax exclusion from Jan. 1, 1976, to Jan. 1, 1977. That would make retirees liable for such taxes for the 1977 calender year but not for 1976.