The Senate yesterday crushed an attempt to pump small amounts of income tax revenues into the Social Security system and thus reduce proposed heavy new payroll taxes for workers and business.
The House has already passed a bill tripling Social Security taxes for the highest paid workers . . . and raising them for all workers . . . over the next decade. The Social Security [WORD ILLEGIBLE] bill that the Senate started debating yesterday would more than double taxes by 1987 for the highest paid workers. The President wants Congress to complete action before going home this year lest the Social Security system's reserve funds dry up because of mounting benefit [WORD ILLEGIBLE] and lagging revenues.
The President earlier this year proposed use of income tax revenues to help pay Social Security [WORD ILLEGIBLE] in times of high unemployment, when Social Security tax revenues are low.
Sen. Thomas F. Eagleton (D-Mo.), offering a similar amendment to take about $500 million annually out of income tax revenues and put it into the Social Security trust funds, said the Social Security payroll tax for employees appeared to be moving "past the breaking point." But he lost 74 to 16.
The bill's floor manager Gaylord Nelson (D-Wis.), opposed the amendment. Senate Finance Committee Chairman Russell B. Long (D-L. [WORD ILLEGIBLE] said" there's no general revenue to pay it with - the general revenue is minus [WORD ILLEGIBLE] " a reference to the federal deficit.
Conservatives fear that use of general revenues to pay for Social Security would generate ever-increasing demands to raise benefits without voting payroll tax increases to pay for them.
Debate began amid grumblings by some senators about the large payroll tax increases and the fact that for the first time, under the Finance Committee Bill, employers would be asked to pay a larger share of the payroll taxes than exployees. There were demands for a delay to give senators more time to study the bill. There were some hints of an attempt to stall the bill past adjournment - and possibly even a filibuster.
"Sometime next year would be plenty of time" for passage, said Sen. James B. Allen (D-Ma.), "This plan needs just a little bit more baking in the oven . . . Whereas the Social Security system was once looked on as a haven of security for the people, it is beginning to be looked on as a tremendous burden to the working people" who must pay ever higher taxes to support benefits.
The most controversial amendments to the bill are expected today. Two of them will be offered by Sen. Carl T. Curtis (R-Neb.) and are basically similar. They would wipe out provisions in the Nelson bill which would impose higher taxes on employers by having them pay taxes on the first $50,000 of each employee's wages from 1979 to 1984 and $75,000 from 1985 on, while employees would be paying on smaller amounts.
In 1935, for example, an employer would pay a tax of $5,250 for an employee making $75,000 because the employer's 7 per cent tax would be levied on the entire $75,000 wage. But the employee would pay only $2.121 because his 7 per cent tax would be applied only on the first $30,300 of his salary.
Curtis called this a "soak business" plan and as an alternative is proposing to keep the traditional system of equal taxes and wage bases for employers and employees. His amendments would thus lower taxes on business as compared with the Nelson plan, but raise them for workers. The House-passed bill maintains the traditional system.
In a letter to senators, Secretary of Health, Education and Welfare Joseph A. Califano Jr. endorsed the Nelson plan.
The U.S. Chamber of Commerce, however, declared that higher taxes on employers would retard capital investment, spur inflattion and cause the loss of 400,000 jobs.
Califano also opposed an amendment by Sen. Bob Dole (R-Kan.) removing altogether in 1932 the present $9,000 limit on what a Social Security pensioner can earn from a job each year without reduction of benefits. The provision, already passed by the House would cost the government $23 billion from 1982 to 1987. Califano said, because it "would benefit most the wealthier citizens among the elderly." The American Association of Retired Persons called this "an outrageous distortion."