President Carter said yesterday that higher Social Security taxes such as he proposed and the House approved on Thursday are likely both to be inflationary and to have "a dampening effect on the economy."
But he told a group of newspaper editors that the taxes have to be raised so that Social Security system "won't go broke," and he added that he will act to offset their effect next year by proposing income tax cuts as part of his general tax revision plan.
"If the Social Security tax increase is substantial . . . we'll try to compensate for this in the tax reform package," Carter said in a telephone interview with delegates to the annual convention of the National Newspaper Association in Houston.
Carter noted that at a news conference Thursday he announced he was postponing submission of the tax revision plan until next year, in part so that administration economists can study the probable impact of higher Social Security taxes on the economy.
"I would guess that a major factor would be that if the Social Security tax increase is substantial after the Congress gets through, we will try to compensate for this in the tax reform package," he said.
Initially, the administration planned to include a general income tax reduction in the tax revision package to soften opposition to the proposed closing of tax "loopholes" and the elimination of certain tax incentives. But in recent weeks, with economic recovery appearing to lag, tax cuts have been viewed more as a means to stimulate the economy.
Yesterday, the President added still a third rationale for proposing an income tax reduction next year - to offset the economic impact of higher Social Security taxes.
Nevertheless, Carter told the newspaper executives there is "no alternative" to increasing Social Security taxes if the Social Security system is to be saved from bankruptcy.
The House Thursday passed legislation that between now and 1986 would raise the Social Security tax rate from 5.85 per cent to 7.10 per cent and the wage base on which the tax is levied from $16,500 to $40,200. The President said yesterday the House bill is "fairly compatible" with his proposals. Similar legislation is pending in the Senate Finance Committee.
On other topics during the telephone interview, the President:
Said he is "quite concerned" with the assertion by Prime Minister John Vorster in a recent television interview that South Africa has never pledged not to develop nuclear explosive devices. Carter said the United States had received such assurances from South Africa both through normal diplomatic communications and in a personal letter to him from Vorster.
Told a questioner from Texas that his "ultimate goal" in the energy field is to deregulate new natural gas but that he does not want to do it "too fast," - Carter has called suggestions for the immediate deregulation of natural gas "a ripoff."
Expressed sympathy with Western farmers because of a court-decision and proposed Interior Department regulations growing out of it that would prohibit the use of water from federal projects to irrigate farms larger than 160 acres. "I think that there ought to be some larger permits for land holdings," he said.
Criticized the independence of the Postal Service from the White House and said he is working with Congress to have some accountability between the Postal Service and the President.
Carter also signed two bills yesterday. One provides a four-year extension of assistance to the 115,000 Indo-chinese refugees who fled to the United States after the Vietnam war and gives those refugees permanent resident alien status. The other bill implements treaties under which American citizens in Mexican and Canadian prisons will be sent back to the United States to complete their sentences.
Yesterday afternoon, the President flew by helocopter to camp David, Md., where he was to spend the weekend.