Bill Would Let You Put Taxes on Credit Card

WASHINGTON By 1994, taxpayers will be able to put their taxpayment on their credit cards, opening a potential $300 billionmarket for issuers, if President Bush signs legislation now inCongress.

But industry analysts and consumer advocates question whetherthe government should encourage more credit card debt, as evenFederal Reserve Chairman Alan Greenspan says the struggle to get outfrom under that burden will take at least a few more years.

"I wouldn't necessarily be opposed to this, because it would bea convenience," said Elgie Holstein, executive director of BankcardHolders of America, a consumer group that tracks credit card rates."But I would want to warn consumers that this is going to be a costlyconvenience."

The tax law change is in the House measure providing money forthe nation's cities as a balm after the Los Angeles riots. Similarlanguage was dropped this month from the Senate version of the urbanaid bill but could be restored when the chamber returns to work inSeptember.

Differences between the bills must be resolved in a conferencecommittee.

Bush is likely to sign the measure, but Internal Revenue Serviceofficials say because of the complexity of setting up a system totake credit card chits, 1994 might be the earliest taxpayers can tellUncle Sam to "Charge it."

But before federal tax bills can be charged, IRS rulemakers willhave to settle with credit card issuers what could be the thorniestproblem - deciding who will pay the customary fee to process thetransaction.

Credit card companies charge merchants a "discount fee" -usually between 1.5 percent and 5 percent of a purchase. The pendinglegislation would lift the prohibition on federal agencies frompaying such surcharges but says nothing about who would pay them.

IRS officials said yet-to-be-written regulations would determinewhether the government would pay the surcharge or pass it along tothe taxpayer. Rush also said negotiations with the government areunder way to decide the fee's size.

In congressional testimony last month, Greenspan said consumersare about halfway through the process of working off their debt, butat least a few more years would pass before consumer spending -two-thirds of economic activity - would pick up again.