House strategists hope to use President Carter's popular tax rebate plan to save more than 1 million disabled private industry and federal retirees from a heavy, unexpected tax bite on their 1976 returns.
In the tax reform act passed late last year, Congress eliminated - retroactive to Jan. 1, 1976 - the maximum $100 a week sick and disability pay tax exclusion that more than 1.4 million Americans use each year to shave their federal tax liability.
The action came as a late and unwelcome surprise to most retirees who had budgeted and estimated their 1976 taxes on the basis of the sick-pay exclusion. By making the effective date of the law Jan. 1, 1976, Congress wiped out the benefit for the entire 1976 tax year.
Unless it is changed, and quickly, more than 1 million people, retired on partial or temporary disability, will have to pay larger taxes for 1976 than they anticipated.
Legislation to let those retirees off the hook for the 1976 calender year was first introduced by Sen. Robert Dole (R-Kans.) and Rep. Robert W. Daniel Jr. (R-Va.) Since then, Dole and Daniel have been joined by nearly 90 cosponsors in the House and a score of influential senators, including Hubert H. Humphrey (D-Minn.)
The plan wouldn't change the law, which eliminates the sick-pay tax exclusion, except in the cases of persons who are certified as totally and permanently disabled. But it would move the starting date for the new law up to Jan. 1 of this year, thereby saving the retirees from paying - in some cases - as much as $6000 more for 1976 than they had anticipated.
The retroactive nature of the law is all the more unfair since many retirees now face a penalty from teh government because they badly underestimated their 1976 tax bills when paying quarterly even though those estimates were accurate until Congress changed the rules.
Time is the problem because retirees, like the rest of us, must have their final tax payments into the IRS within a couple of months.
To make sure that the bill moving the effective date of the tax liability up one year gets quick action, supporters hope to tack it onto legislation President Carter has proposed. It would, among other things, give a $50 rebate for each dependent to many taxpayers.
Since the idea of stimulating the economy by giving money - yours anyhow - back to people is popular with the new administration and new Congress, the Carter plan is likely to win quick approval. Insiders expect it could clear the House, and perhaps be signed into law by mid-March, even though hearings have not yet been held. Putting the Dole-Daniel plan (which is backed by most area legislators) in with the Carter pay-back plan would guarantee it prompt attention.
Retirees who have comments on the plan ought to write their senators and representative, and do it soon. The number of the Dole bill is S. 4. On the House side, the Daniel bill is H.R. 318.