President Carter's plan to use income tax revenues to help finance Social Security benefits was rejected by the Senate Finance Committee yesterday 11 to 3.
Liberal Democrats like Gaylord Nelsos (Wis). Abraham A. Ribicoff (Conn.) and Daniel Patrick Moynihan (N.Y.) united with committee Chairman Russell B. Long (D-La.) and Republicans to crush the controversial plan.
Social Security benefits have always been financed by an earmarked employer-employee Social Security payroll tax, not by dipping into the general income tax revenues of the treasury.
Long said the committee vote means that whatever money may be needed to shore up the sagging old-age and disability trust funds will come from earmarked taxes, not general funds.
Otherwise, it would simply be like "telling the Federal Reserve to print the money," he said.
The Carter plan, to help meet growing deficits in Social Security funds, would have pumped $14 billion in general income tax funds out of the treasury and into Social Security over the next five years.
Secretary of Health, Education and Welfare Joseph A. Califano Jr., in outlining the plan earlier, said it would be reasonable for the treasury to make up to the trust funds any income they lost when unemployment rose over 6 per cent and the Social Security tax consequently brought in less money. Califano calculated that amount at $14 billion for recent years, and said Congress should consider making additional fund shifts whenever unemployment rose over 6 per cent in the future.
Long, angrily denouncing the plan yesterday, said the federal government was running at a deficit on many programs. Here was one, he said, which it was the accepted practice to impose a specific tax to cover all costs - and the administration wanted to abandon that and let Social Security slide into deficit financing, too.
One reason for the plan's defeat was apprehension that organizations of the elderly, knowing that the whole treasury was open to them potentially for the first time, would mount tremendous pressures for benefit increases unaccompanied by tax increases, thus worsening the entire fiscal posture of the government.
On the other hand, some senators said many elderly fear that if Social Security depends on treasury funds, any time the treasury's general income tax revenues are running at a deficit compared with general government outlays there will be pressure to cut back on Social Security benefits, cancel cost-of-living increases and the like.
While killing the income-tax revenue plan, the committee put off - perhaps for a few days, perhaps until September - action on other proposals for new Social Security financing. Long wanted to vote, but Nelson said he'd rather delay the issue for more study.
In the 11 to 3 vote, only William D. Hathaway (D. Maine), Floyd K. Haskell (D-Colo.) and Robert W. Packwood (R-Ore.) backed the Carter position.
In a separate action, the committee began working on welfare matters. It tentatively approved, with changes, an administration request that families who legally adopt "hard-to-place" children be eligible for monthly payments to help support the children under the program of Aid to families with dependent children. This amounts to adoption subsidies.