The Carter administration's plan to bail out the Social Security system by using general revenues for the first time encountered immediate opposition yesterday from the chairman of the House Ways and Means Committee.
Rep. Al Uilman (D-Ore.) charged that the President's plan, submitted to Congress yesterday, "violates the general principle of having a contributory system and makes it easy to move into a broad welfare concept."
His prompt rejection of the key element indicated the administration's proposal will have a difficult time getting through the House committee, despite predictions that two Social Cecurity trust funds will be exhausted in a few years.
Business groups and a key Republican legislator, Rep. Bill Archer of Texas, also were critical of the plan.
Carter, as expected, proposed yesterday that $14 billion of general or income tax, revenues be transferred to two trust funds to help overcome a growing short-range deficit. Since the system was founded in the 1930s, benefits have been financed by payroll taxes paid by employers and employees.
Archer, ranking Republican on the Social Security subcommittee, and business groups like the U.S. Chamber of Commerce also opposed another key part of Carter's plan - a proposal to raise the amount of workers' income on which employers must pay the Social Security payroll tax.
Archer said it would increase unemployment because employers would be reluctant to hire new workers whose wages would be accompanied by higher payroll taxes.
At the White House, Vice President Mondale said prompt congressional action is of "the utmost importance" if the system is to be shored up. A statement from President Carter, who is in Europe, said that congressional enactment of his proposal "is an overriding immediate objective."
Ullman, however, said he favored raising the wage base - the part of an indivdual's earnings on which the Social Security tax is paid - and tax rates to solve the short-range problem, and he said Congress would not get around to considering any long range solutions this year.
The administration had anticipated strong business oppositin to raising the employer share of payroll taxes by increasing the wage base. Secretary of Health, Education and Welfare Joseph A. Califano Jr. said corporate profits are high enough to support the additional employer payments. "There is plenty of money on the corporate side to do this," he told reporters.
The administration made its financing proposals after trustees of the Social Security system concluded that the trust funds needed both short-range and long-range changes to remain stable.
The trustees' report, made public yesterday, estimated that the old-age and survivors insurance and disability trust funds would run a $5.6 billion deficit in this calendar year - the third consecutive annual deficit. At that rate, the disability trust fund would be exhausted in 1979 and the old-age and survivors trust fund would be empty in 1983.
The administration's plan would transfer $14.1 billion of general government revenues to the trust funds from 1978 to 1980. This is described as a "counter-cyclical" approach because it would in effect make up for payroll tax revenue lost through unemployment during recession years.
The other major change in financing would require employers to pay taxes on all the wages an employee earns. At present, both employers and employees pay equal taxes on a wage base not exceeding $16.500 a year. Under Carter's plan for employers' taxes, the wage base would be increased to $23,400 in 1979, to $37,500 in 1980, and to the entire amount of wages paid in 1981.
The administration estimated that the increased cost to employers would total $30.4 billion in the four years 1979-82. Spokesmen maintained that if the deficits had been made up in the conventional way - increasing both tax rates and wage base on both employers and employees - business would have been faced with an even larger increase: $34.2 billion.
Carter's proposal would also increase the amount of workers' salaries subject to payroll taxes by $600 in 1979, 1981, 1983 and 1985. Those increases are in addition to the wage-base increases already called for in existing law.
The effect of the wage-base changes, the administration said, would be to avoid settling more of the Social Security burden on middle-and low-income workers and to place more of it on business and high-wage earners.