The Senate neared final passage last night of a bill that would increase Social Security taxes massively over the next quarter century and boost them more for employers than for employees.
The current $965-a-year maximum tax on the highest-paid workers would more than double to $2,279, by 1986 under the Senate bill. Even for the average worker, in the $10,000-a-year range, the current $585 tax would reach $710 by 1936 under the Senate plan. The House has already passed a Social Security bill which would raise the maximum tax even higher.
All told, officials said the Senate bill would raise Social Security taxes about $70 billion to $75 billion through 1983, on top of increases already scheduled in existing law.
The legislation, which will go to conference with the House, is intended to assure the financial soundness of the system for the next half-century and more. Today the system is paying out more in benefits than it takes in each year in taxes.
Before final passage the Senate voted on a series of amendments - some unrelated to Social Security or likely to be dropped in conference. A $250-per-student college-tuition credit, sponsored, by William V. Roth (R-Del), was added as a rider, 61 to 11, at an estimated 1 billion-plus cost in revenue loss a year.
The Senate rejected, 50 to 28, a proposal, by Barry M. Goldwater (R-Ariz.) any's Bob Dole (R-Kan.) to remove altogether in 1962 the current $3,000 [WORD ILLEGIBLE] on what a Social Security [WORD ILLEGIBLE] or over can earn from a job without loss of benefits.
[WORD ILLEGIBLE] House already has adopted such a [WORD ILLEGIBLE] but the administration opposed [WORD ILLEGIBLE] on grounds of cost, [WORD ILLEGIBLE] that most of the benefits would go to high income semi-retired professional who don't need the money. Goldwater called the earnings limit "outrageous discrimination against elderly persons who want to work, and Dole aid, "This is not a rich man's amendment.
However, Frank Church (D-Idano) said the main beneficiaries would be "the doctors, the lawyers, the business executives, the Wall Street financiers," and in the crucial vote, won adoption of a substitute removing the earnings limitation totally only at age 70.
Other provisions of the bill, approved earlier by the Finance Committee, would raise the limit for all beneficiaries from the current $3,000 to $4,500 next year and $6,000 in 1979. Church supporters said the combination of the committee language and his age-70 provision would cost $700 million to $800 million a year less than the Goldwater-Dole provision.
Church also won 50-to-21 approval of an amendment providing for semi-annual instead of annual cost-of-living increases in Social Security benefits, but only if price rise at least a per cent in a six-month period. Church said this would simply be a safeguard for pensioners against rapid inflationary changes.
In a dramatic 42-to-41 vote, with Vice President Mondale breaking the tie with his first Senate vote as Vice President, the Senate endorsed the provision shifting a higher burden of the Social Security tax onto employers than is paid by employees. Since 1935 workers and employers have always paid the tax on a 50-50 basis, but Gaylord Nelson (D-Wis.) floor manager of the bill, inserted in the Finance Committee a provision making employers pay more from now on.
Carl T. Curtis (R-Neb.) tried for the second time in two days to kill this provision and return to a 50-50 basis (as in the House bill), but the administration opposed this as imposing too heavy a burden on the average worker.
At present worker and employer each pays 5.85 per cent on the first $16,500 of salary.
The mechanism used by Nelson to make employers pay more is the requirement that an employer pay the tax on the first $50,000 of a worker's annual salary from 1979 to 1984, and on the first $75,000 from 1985 on - while the employee is paying the tax on a smaller maximum - $19,500 in 1979, rising to $30,300 by 1985 and gradually increasing to $75,000, but not until after the year 2000.
In 1985, for example, a worker at the top taxable wage would be paying $2,279, but the employer would be paying $5,325. Under the Curtis amendment, both worker and employer would have paid about $2,400.
The Senate approved, 57 to 28, a "local government fiscal relief" proposal by John C. Danforth (R-Mo.) to let state, local and municipal governments and nonprofit organizations pay 10 per cent less than the normal Social Security tax rate in making contributions for their employees - a provision which Danforth said was badly needed because of the poor financial condition of such governments and nonprofit groups.
The cost would be about $2 billion a year to the Social Security trust funds. The reduction would go only to the employer, not to the worker, who would pay the normal tax rate.
The administration opposed the provision on cost grounds, and opponents said it could wreck the balanced funding in the bill. Danforth said, however, that it was fair because, unlike businesses, local governments cannot write off the costs of Social Security taxes against their federal income tax.
Losses to the trust fund from the Danforth amendment were partially made up by inclusion in Church's age-70 amendment of a slight increase in the tax rate - above the figure originally recommended by the Finance Committee. However, Danforth said he would also seek an authorization in the bill to take money from Treasury income-tax revenues to make up for whatever his amendment cost the Social Security trust fund.
Also adopted yesterday was an amendment by Birch Bayh (D-Ind.) - said by Social Security officials to cost $400 million a year - removing the earnings limitation for blind persons receiving disability insurance. It has been passed several times before. That may be its fate again - and that of several of the other floor amendments adopted yesterday which would increase costs substantially.
Daniel Patrick Moynihan (D-N.Y.) lost, 43 to 42, in an attempt to moderate a provision tightening up earnings tests for welfare under the Aid-to-Families - with - Department - Children program.
The bill as passed would raise Social Security tax rates from the 6.05 per cent already scheduled for 1978 to 6.135 per cent in 1979-80), 6.60 per cent in 1981, 6.65 per cent from 1982.84, 7.05 per cent in 1985, 7.10 per cent in 1986-89, 7.55 per cent in 1990-94, 8.10 per cent from 1995-2000, 8.70 per cent from 2001-10 and 9.20 per cent from 2011 on.
The employer wage base would rise to $50,000 in 1979 and $75,000 in 1985. The employee wage base would be $17,700 in 1978, $19,500 in 1979, $21,000 in 1980 and rising in steps to $33,900 by 1987 and thereafter in accordance with the pace of wage rises in the economy. The self-employed would pay 1 1/2 times the employee tax.
The bill also rewrites the benefit formula for future retirees to correct a quirk that was driving benefits upward too sharply. The new formula slightly reduces the pace of growth, so that the average future retiree will receive initial benefits equal to 43 per cent of Social Security-covered earnings in the last year before retirement (the current figure is 45 per cent).
For low-income workers this replacement ratio would be 54 per cent, for high-income, 32 per cent. The maximum monthly benefit, now $460 (plus 50 per cent extra for a wife), would rise to about $750 (plus extra for the wife) in a decade - about the same level as the House bill.
Other major provisions authorize $374 million in 1978 in special "fiscal relief" to the states for welfare costs, offset Civil Service benefits payable to a wife or widow against Social Security benefits, permit welfare demonstration projects to ignore ordinary rules, provided the Secretary of Health, Education and Welfare doesn't disapprove in advance, and permit use of Social Security and unemployment insurance wage records to verify earnings to determine welfare eligibility.