Leaders of the House Budget Committee are planning to defy President Carter and recommend that Congress write a sizable Social Security tax cut into the new congressional budget resolution -- at the expense of some of the income-tax cuts Carter has proposed.
The recommendation, to be considered by the panel in a drafting session next Tuesday, would provide for a $7.5 billion reduction in payroll taxes -- enough to put Social Security taxes back where they would have been if Congress had not voted to raise them last December. The cuts would become effective Oct. 1.
To prevent the Social Security tax cuts from bloating the budget deficit, the plan would trim back some $7.5 billion off the $25 billion in net income-taxccuts that Carter has proposed for individuals and corporations. The president has said he is opposed to such substitution.
Significantly, the senior Budget Committee members' recommendations make no provision for the $9.4 billion in revenue-raising "tax reforms" that Carter proposed to offset the cost of his income-tax cuts. Their suggested budget resolution will say only that if "reforms" are enacted, the income-tax cuts should be enlarged.
The Budget Committee leaders simply doubt that Congress will enact any of Carter's proposed "reforms."
If the Budget Committee follows its leaders, its action will heighten pressure on the House Ways and Means Committee to cut Social Security taxes when it drafts the big tax bill proposed by the president.Ways and Means is scheduled to begin work in late April.
The day after the Budget Committee considers its plan, the caucus of all House Democrats is scheduled to take up the question of a payroll tax rollback, and are odds are that it will endorse some sort of cut.
Sources say these two actions together would make a rollback unstoppable.
The proposal in the Budget Committee is being sponsored by its chairman, Rep. Robert N. Giaimo (D-COnn.), and veteran Rep. Barber B. Conable Jr. (R-N.Y.). Several other panel members from both parties are expected to support the plan.
The Social Security tax-cut proposal is scheduled to be unveiled formally by Giaimo as part of the chairman's "mark" -- the set of recommendations on spending and tax policy that serves as the benchmark each year for the committee's deliberations.
Giaimo is expected to propose a spending level of $500.7 billion -- close to the $500.2 billion Carter recommended for fiscal 1979, which begins Oct. 1. But the deficit would be $57.6 billion, compared to $60.6 billion in the president's budget, because Giaimo expects $3.2 billion more in tax collections.
On the spending side, House staffers feel that the White House inflated budget estimates for defense and international aid and misjudged payments for interest and other outlays. Their estimate of defense spending is $2 billion below Carter's.
At the same time, the leadership is expected to include an estimated $6 billion increase over Carter's budget in agricultural spending -- including $2 billion to $2.5 billion for the cost of a new farm bill just passed by the Senate. Panel leaders feel Carter will not be able to head the measure off.
The Budget Committee action would be a slap at the administration's position on Social Security taxes. Carter has said he is opposed to any rollback, in part to keep his own income-tax cut package intact.
The president is said to have told some aides he may be willing to go along with a cut in payroll taxes if it is financed by new revenues from the crude-oil tax being considered as part of his energy bill. However, most observers believe that oil tax now is dead.
Under the Giaimo-Conable proposal, the 1979 payroll tax would be rolled back from 6.1 percent of the first $22,900 in wages to 5.8 percent of the first $18,900 -- the level to which it would have risen in 1979 under 1972-73 legislation.
The resulting $7.5 billion reduction in revenue would be made up with general revenues from federal income taxes. The income taxes would be earmarked to pay for one-fourth of Medicare hospital insurance, now financed by Social Security payroll taxes.
Together with the monies earmarked for the Medicare fund, the shift would bring the total cost of the tax package to $28.4 billion -- or $4.2 billion below the $32.6 billion price tag on the package Carter proposed. The figures are computed on a fiscal-year basis.
With the cost of extending last year's income-tax reductions taken out, the total in new tax cuts provided by the Budget Committee package would be $19.4 billion. By comparison, Carter's package would have provided $25.3 billion in new tax reductions.