Although Republicans delayed the deficit-reduction package until assured it would not raise income tax rates, they overlooked a scheme to jolt the unsuspecting American taxpayer through the back door.
To reach $9 billion in unspecified revenue boosts, Congress may approve a new Medicare tax of 1.45 percent on everybody's gross income in excess of $43,800. Because this is part of the Social Security payroll levy rather than the income tax, it technically would not violate President Reagan's anti-tax-hike pledge.
It would do much more. Besides burdening middle- to upper-income taxpayers and independent businessmen in a fragile economy, it would rewrite policy. A new device for taxing wealth and redistributing income would be in place. The insurance fig leaf for Social Security would be stripped away. The compact of 1986, which sacrificed tax preferences for the 28 percent top marginal tax rate, would be shattered.
The game plan has been for the tax to go on the books without hearings, without a specific roll-call vote in committee or on the floor and with little debate. Even before the Oct. 19 stock market plunge reversed President Reagan's anti-tax-increase stand, the backdoor tax had been approved by the Senate Finance Committee without raising attention, and was crawling toward session-end passage.
During tedious weeks of deficit talks, only the bottom-line tax take -- no details -- was discussed. Even when Republicans insisted late last week on a bar against income-tax hikes, nobody locked the back door. Treasury Secretary James A. Baker III and bipartisan leaders of congressional tax-writing committees will sit down after Thanksgiving and specify higher taxes, perhaps including the Medicare levy.
Until now, there has been hardly any discussion of the Finance Commitee's remarkable backdoor tax. It is described not as a tax but as an innocuous lifting of the cap or income limit -- $43,800 this year, $45,000 in 1988 -- on the 1.45 percent Medicare share of the Social Security tax.
In plain language, all earned income -- not diluted by any deductions -- will be taxed at 1.45 percent to infinity. The businessman must pay an equal percentage for employees. For the self-employed, the rate is doubled to 2.9 percent.
It is at once a taxer's bonanza and Pandora's box. The estimated revenue return of $2.2 billion is for the first year only, when its effect is only partial. That rises to more than $6 billion the next year, but that's just the start. Why only 1.45 percent? Why, in time, not the whole 7.65 percent Social Security tax?
Here is the back door to Speaker Jim Wright's stubborn efforts to prevent the 28 percent tax scheduled for Jan. 1. That rate, in an intuitive stroke of genius by then Finance chairman Bob Packwood, saved tax reform in 1986 as a tradeoff for ending preferences. Since the backdoor tax means an effective marginal rate of at least 29.5 percent, does Sen. Packwood's support constitute a breach of faith with the tax reform compact? ''No,'' he told us, ''this is means-testing for Medicare.''
But the taxpayer is scarcely assuaged simply because the tax is not considered a tax. Even considered ''means-testing,'' this abandons the insurance concept for Social Security. Rep. Claude Pepper, that dogged champion of the aged, has his eyes on this new bonanza to finance catastrophic health care.
Matching the audacity of this effort has been the passivity of the administration. As Finance Committee Democrats and a few Republicans approved a tax bill without specifically voting on the backdoor scheme, the Treasury was silent.
We sought but failed to get a simple statement from the Treasury, for or against the tax. We finally learned the administration does not like it and hopes it is not in the final version. But this is an administration that has taken to swallowing much that it does not like. The absence of a presidential promise to veto backdoor breaching of the 28 percent tax rate is ominous.