The new balanced budget law will allow people to charge their tax bills starting next year-a business long sought by credit card companies.

However, the new law forbids the government from paying a fee to banks that process credit card payments.

"It's hard to understand why a company would want to eat the expenses of handling tax payments for the government," said Lamar Smith, lobbyist for Visa USA.

Lobbyists are pressing lawmakers to support legislation introduced July 30 that would eliminate the prohibition on processing fees.

The provision is part of a sweeping plan to reform the Internal Revenue Service introduced in the Senate by Charles Grassley, R-Iowa, and J. Robert Kerrey, D-Neb., and in the House by Rob Portman, R-Ohio, and Ben Cardin, D- Md.

An aide to Rep. Portman said the fees are justified because the government will save money if tax bills are charged on credit cards.

"Anything that can be done to reduce the amount of paper flowing between the IRS and taxpayers seems to make a lot of sense," he said.

MasterCard International lobbyist William Binzel predicted the government could work out better rates than the typical 2% fee that merchants pay to banks for processing their credit card receipts.

"Because of the likely volume of business, they could negotiate a very good discount," he said.

But some key lawmakers, including House Ways and Means Committee Chairman Bill Archer, are opposed to any measure that would siphon tax recipients from the Treasury.

Sources said Rep. Archer, R-Tex., wants issuers to pass the processing fees to taxpayers. For instance, as with cash advances offered by credit card companies, customers could be charged interest immediately after paying taxes, rather than after the typical one-month grace period.

But the industry isn't ready to give in, Mr. Binzel said.

"The reality is all forms of payment have processing costs," he said. "We don't think consumers using credit cards should be unfairly penalized when there is no reciprocal charge on payment by check."

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