Things are looking up (slightly) for people who have been hit by a retroactive change in the tax laws, making them liable for income tax on money received in 1976 for sick and disability pay.
Congress late last year passed the tax reform act, which among other things, said that only persons who are totally and permanently disabled can claim the maximum $100 a week sickpay exclusion from their income tax for 1976.
The bad news means that more than 1 million taxpayers who had counted on the tax exclusion now owe Uncle Sam an estimated $380 million more than they thought on their 1976 taxes.
Early this year, Sen. Robert Dole (R-Kan.) and Rep. Robert W. Daniel Jr. (R-Va.) introduced bills that would take the heat off those persons for the 1976 tax year. Their bills would change the effective date of the provision ending the disability-sick pay exclusion from Jan. 1, 1976, to Jan. 1, 1977.
Daniel has picked up more than 140 cosponsors in the House, including 11 members of the Ways and Menas Committee.That unit handles most major tax matters and would have to clear the legislation.
Odds are that Committee Chairman Al Ullman (D-Ore.) will hold hearings on the Daniel-Dole bill sometime next month.
Congress will have to move quickly on the legislation if taxpayers are to know how to fill out their tax returns by the mid-April deadline.
Congressional leaders in the Senate and House have been sympathetic to the Daniel-Dole bill. Both budget committees have revised their estimates of government income for 1976 to reflect the approximately $380 million that would be "lost" to the government if the exemptions are permitted for the 1976 taxable year.
It is still too early to predict the fate of the Daniel-Dole bill. But there is good reason to believe that it will be enacted, especially if the people involved keep reminding their elected officials that the item is a hot one.