The government is now determined to cut spending. And one of the biggest budgetary items that has the eye of the axe wielders is all that money that's paid out to Social Security beneficiaries.

The money cutters ask: "Social Security benefits are income -- so why not tax them as income?" If Social Security benefits were taxed like any other income, the government would haul in close to $7 billion more this year. By 1984, the take would be $14 billion.

In its latest report to Congress, the Quadrennial Advisory Council on Social Security strongly urged that half the benefits from Social Security should be taxed. The rationale is based on the tax treatment given to regular pension benefits. Roughly half the money that goes into your overall Social Security tax is paid by your employer. This contribution, the advisory council says, should be taxed like any other income. The money you put in for the overall percentage of it reflected in your benefits would not be taxed. f

Before your blood boils about having your Social Security checks taxed, you have to realize that some three-fifths of the current Social Security beneficiaries would pay little, if any, tax on their checks because their overall income is too low.

The tax would hit retired persons who are relatively well-off. For example, less than 6 percent of current beneficiaries would be taxed more than 25 percent. People whose retirement income is $15,000 or more would be the ones who would have to pay a tax. The very well-off, approximately one percent of all beneficiaries, would have their Social Security benefits reduced by 70 percent.

In a report published by the American Enterprise Institute, economist Mickey D. Levy says Social Security benefits should not be subject to taxation without an overhaul of the whole system. He outlines a package that would help balance things out for middle-income retirees who might suffer from a tax on Social Security benefits. First of all, the tax would be phased in so as not to hurt people who are now retired or who are approaching retirement age. These people, Levy says, have made retirement plans and budgets based on receiving tax-free Social Security benefits.

To cushion the impact for current workers, Levy proposes allowing a tax exclusion or deduction on the Social Security tax withheld from your paychecks. This would put more money into workers' take-home pay, and it would primarily benefit higher-income workers, offsetting the tougher tax treatment they would suffer when Social Security checks started coming in.

Levy's report also proposes the elimination or phase-out of the so-called "retirement test," which limits the amount of money you can earn and still receive full Social Security benefits. This year, retirees aged 65 and above can earn up to $5,000 a year from part-time jobs without having their Social Security benefits diminished. This, too, would tend to benefit high-income retirees, because they're the ones who can usually make more than $5,000 a year from part-time jobs.

Social Security benefits are being probed for further savings from another direction. As it stands now, beneficiaries get an "inflation escalator" increase every year based on a previous reading of the Consumer Price Index.

There's a move on to reduce this "inflation feeding" escalator benefit so it will reflect 80 to 85 percent of the official inflation index. It's an election year, so no action on cutting Social Security benefits will be taken now. But watch out for next year.

Q: I heard about a law that allows stopping payment on the money you owe when there's a dispute about warranty repairs. You stop your payment, and the finance company or bank then puts the arm on the dealer to fix your car or washing machine or other product in warranty. How does this work?

A: First off, you should never just stop making payments on your installment loan. This could get your credit rating into trouble and might even bring on legal sanctions.

There is a way to use your credit clout, but it has to be done carefully. According to a Federal Trade Commission lawyer, there is a ruling which says a borrower can defend himself against the lender as well as the seller of a product as long as there is a business relationship between the lender and seller.

This covers situations where you buy something from a dealer who helps with financing by getting a loan from a bank, finance company or some other lender. There's a regular relationship between seller and lender.

If something goes wrong with the product you bought, you first must exhaust all normal complaint channels. Then, you can go to the lender and explain your complaint. In some states you can set up an escrow account and pay your money into that until the dispute is settled. This puts pressure on the lender to put pressure on the dealer to fix your car, washing machine or whatever. Other states allow lenders to reduce your loan payments by the amount it cost you to have the product fixed (and then the dealer is charged for this amount). At any rate, your loan contract must have language in it that spells our your rights to put pressure on the lender to get the complaint settled.

Q: With gasoline prices being raised almost every week and the cost of cars going up each year, how much does it cost to own and operate a car these days?

A: A recent survey of one metropolitan area by the Federal Highway Administration, Division of Statistics shows that it now costs around 25 cents a mile to own a medium-sized, average-priced car. Driving 12,000 a year would cost you around $3,000 (for depreciation, gasoline, insurance, repairs, the works). A sub-compact car, under these same circumstances, would cost around $2,200 a year while a van would cost $4,400.