The new increases in Social Security taxes now being pushed through Congress will have [WORDS ILLEGIBLE] the [WORD ILLEGIBLE] probably more substantial that the law makers are claiming - accounting to businessmen and private analysts.
While congressional estimates assert there will be so major [WORD ILLEGIBLE] on the economy, private economics [WORD ILLEGIBLE] the tax hikes could add almost a fail percentage point to the inflation rate by 1981 and also make a dent in output and employment.
Moreover, analysts are concerned that the brunt of the impact will come in 1980 and in 1981, when the economy is expected to be weak anyway and the nation will be hit by the last big jump in the newly proposed energy consumption taxes.
"What that decision make the impact of the regular cyclical slowdown even worse," said Michael Young, economist at Whatron Economic Forecasting Associates in Philadelphia. "It means any tax cuts the administration was planning will have to be visibly larger."
Albert T. Sommers, vice president of the Conference Board, the New York-based business organization, said the impact could bigger than the [WORD ILLEGIBLE] projections indicate because the payroll tax is so fundamental a part of business costs.
"This system resonates so throughout the economy." Sommers said. "There's really no way to say with great accuracy precisely what these tax increase ultimately will mean."
To be sure, no one in the business community is suggesting the tax hikes shouldn't be enacted. Virtually all the executives and economists contacted by The Post conceded a tax boost was necessary to put the Social Security trust fund back in order.
But businessmen and analysts are worried about how well the administration will be able to offset the impact of the measure. Executives also [WORD ILLEGIBLE] that the Senate version, to be vote on tomorrow, will boost prices even more by loading more of the increase onto employers.
As Young explained it, requiring employers to pay proportionally more than the 50 per cent of the payroll tax they traditionally contribute will bloat unit labor costs and prompt companies to pass on the full brunt of the increase in higher prices to consumers.
As a result, he said, the Senate bill "will have a bigger impact on prices than the House version, which retain the 50-50 split. Under the House version, which retains the 50-50 split. Under the house formula, he said, companies would not raise their prices as much, and inflation would be lower.
Estimates by Data Resource, Inc., the Boston-based economic research firm, show the tax increases contained in the House-passed bill would have little measurable impact until 1979.
After that, however, the effects would be significant."
The DRI projections show the tax hikes will push the inflation rate 0.5 per cent higher than it otherwise would have been by 1980, and a full 0.9 per cent higher by 1981. At the same time, the economy's growth would be slowed by similar amounts.
Otto Eckstein, president of DRI said the firm has not yet compiled projections for the Senate bill, which still is under consideration. But he said the impact would be "in the same neighborhood, but slightly higher than" the House version.
Reaction from businessmen was uniformly pessimistic.Jack W. Gilpin of Varian Associates, the Palo Alto electronics firm, said. "There's no question we'll have to raise our prices." He called the boost "one additional factor" in giving foreign competitors an edge.
And Herbert H. Lyon vice president of the Dow Chemical Co. in Mid-land, Mich., pointed out that the increase in the employer's share of the payroll tax, provided in the Senate version of the bill, may work in the long run to scare companies out of the pension business.
Loans argument is that most private pension plans are set up to credit employers for their contributions to Social Security based on a 50-50 split between company and workers. If that ratio is changed, he said, some firms may shut away from persions to profit-sharing plans.
Economists also are worried about a provision in the House bill that would remove the ceiling on how much a retiree may earn and still qualify for Social Security benefits. Although estimates still are sketchy, they say the provision is bound to crowd the job market further.
The estimates prepared by private economists are substantially more pessimistic than those of congressional staffers. The House report on the Social Security bill asserts flatly that the tax hike "will not have a very significant impact."
Projections by congressional budget officers show a negligible impact on the economy in 1978 and 1978, with only scant effect in later years. Congressional analysts say the differences system from their own assumptions that price boosts would be dampened by weakness in the economy.
The differences have stirred debate over how big a tax cut the Carter administration will have to propose next year to offset the adverse effects of the Social Security tax hike. The President has said he plans to consider at in planning the cut, but cited no in figure.
The congressional estimates show the House bill would boost payroll [WORD ILLEGIBLE] by $2.8 billion in 1978, $5.7 billion in 1979, $7.7 billion in 1980, $16.1 billion in 1981, $20.9 billion in 1982 and $22.6 billion in 1983. However, the impact on the overall gross national porduct could be more.
Moreover, some economists say the administration will have to plan to offset some added effects on employment, which could be hit sharply, particularly if the economy slows in its own in late 1978. Wharton's Michael Young said the effect on joblessness could be sizeable.