Congress may spend the next couple of years undoing poarts of the Tax Reform Act of 1976.
It already has repealed a controversial provision that eliminated - retroactively - the $100 a week sick and disability pay tax exclusion for the 1976 tax year. President Carter has signed that bill into law. It means that individuals who has to pay taxes on sick and disability income for the 1976 year may now apply for a refund on federal taxes paid on sick and disability income up to $5,200 a year.
Now, a group of House members - led by Rep. Newton Steers (R-Md.) - is pressing for another change that would ease the future tax bite on taxpayers who are permanently and totally disabled.
Under present law (the Tax Reform Act), individuals who are under age 65 and retired on permanent and total disability will be allowed the tax exclusion of $100 a week, up to a maximum of $5,200. But for every dollar above $15,000 in adjusted gross income a disabled person earns, he loses one dollar of the exclusion. As Steers points out in a "Dear Colleague" letter to other House members, this means that a disabled person loses all the exclusion at the point where his or her income hits or exceeds $20,200.
Steers' bill, which has 11 cosponsors (including D.C. Del. Walter E. Fauntroy), would make the tax code flexible by linking it to the cost of living. As living costs go up, the $15,000 cutoff point would be increased by the annula percentage rise i n the Consumer Price Index.
The plan would not eliminate the dollar-for-dollar phase-out. But it would mean that the phase-out would start at a slightly higher level each year, to keep pace with inflation.
Administration officials are expected to oppose the Steers bill mainly becuase it could invite similar assaults on the tax reform (some think tax "monstrosity" is a better term) that could unravel the entire package. Steers' bill is H.R. 7194.