(MONEY Magazine) – Thank you for taking a lead in the effort to repeal the government's new 20% withholding tax on some pension payouts. As your December Editor's Notes made clear to me, the law is another slap in the taxpayer's face, and is part of a continuing series of moves to take more money from working taxpayers rather than make the tough choices necessary to reduce government spending. John P. Rankin Bowie, Md.

Since my retirement I have accepted the option of leaving my accumulated profit-sharing monies with my old company, where it is invested, tax deferred. Each year I can select an amount to be paid to me on a quarterly basis or I can elect to have the entire amount in my account paid to me in a lump sum. As this money is the major portion of my wife's and my income, I am currently receiving $6,100 each quarter to take care of current expenses. A letter from my old company says these regular payments are now subject to 20% withholding tax unless they are directly transferred by the company into an IRA. This rollover and 20% tax provision seems to surprise everyone, including my tax preparer, who felt that only total distributions would be affected by the new law. Werner Baum Pittsford, N.Y.

Any cash disbursement from an employer's qualified plan that is eligible for rollover to an IRA or to a new employer's qualified plan is subject to the 20% withholding law unless your employer directly rolls it over for you. These include some profit-sharing as well as pension payouts. Cash disbursements not eligible for rollover and therefore not subject to the 20% withholding include: -- Required minimum distributions received after the age of 70 1/2; -- Payments received in 10 or more annual installments, or in a series of equal installments over your lifetime. When a cash payment is made directly to you on a disbursement eligible for rollover, 20% will be withheld. If you roll over the entire amount of the payout within 60 days, including a sum equal to the 20% withheld, you can recoup the 20% when you file your income tax return. Any money that is not rolled over will be taxed as ordinary income; you can also be hit with a 10% early-withdrawal penalty on it.

As an investor representative, I talk to people every day who not only cannot afford this law but will fall into its trap without knowing it exists. This law is not only unfair; it is also underhanded in the way it snares the unsuspecting, many of whom are likely to have recently become unemployed. J. Dan Payton Skokie, Ill.

I am a trustee of a small trust set up by a deceased aunt for the benefit of her many nieces and nephews. One of the beneficiaries currently receives $133 a month from the trust -- his share of the trust's income. He's 64, had to retire from work for medical reasons in 1988, currently walks only with great pain, lives alone and does not want to be a burden to his three grown children. This man receives just $611 a month disability from Social Security. His only other source of income is $75 a month from his former employer. He just received a letter from their retirement department saying that his monthly check will be subject to the 20% withholding requirement. For him to lose $15 a month cash flow is serious, serious business. He'll get it back next May or June after he files his income tax, but how does that help in the meantime when every dollar counts? John N. Pike Pleasantville, N.Y.

This law will not only discourage companies from administering pension or thrift plans but will also discourage employees from investing in them. Tim S. Pfeiffer Dallas