President Carter's proposal to offer a tax credit as "wage insurance" for workers who hold their pay settlements within the new 7 percent wage guideline is facing a decidely uphill fight in the House Ways and Means Committee.
Although Rep. Al Ullman (D-Ore.), chairman of the panel, has scheduled the tax measure as the committee's first order of business when Congress returns next January, sources say the proposal is likely to become bogged down in controversy.
Ullman warned Treasury Secretary W. Michael Blumenthal in a 1 1/2 hour meeting yesterday that the administration had better send Congress a detailed proposal early - with all the loopholes closed - if it is to avoid seeing the plan run into trouble early.
Meanwhile, Rep. Barber B. Conable Jr. (N.Y.), ranking Republican on Ways and Means, predicted the tax measure would be "a difficult thing to pass quickly" and might run into trouble if members could not agree on details of how the plan would work.
The tax credit proposal, suggested by Democratic economist Arthur M. Okun, was tacked onto Carter's wage-price program as a last-minute sweetener for organized labor. Carter announced only the rough outlines of the plan then, saying details would be worked out later.
A Treasury task force has just finished preparing options on details of the proposal, and is about to begin developing recommendations for policymakers to consider. Labor had complained that complying with the guidelines would leave unions unprotector against inflation.
As described by the president last month, the tax plan would guarantee those workers who abided by the 7 percent wage guideline at least partial reimbursement if inflation exceeded 7 percent. If prices rose by 9 percent, workers would get a tax credit equal to 2 percent of their wages.
However, policymakers have yet to decide what kind of limit or "cap" they want to place on the rebate pan to help hold down costs if inflation exceeds the administration's forecast, and how to provide for a record-keeping system that the Internal Revenue Service can audit.
There also is the thorny question of whether to make the credit available to special groups of workers who may not be able to abide by the guidelines - such as the self-employed, farmers, moonlighters and part-time workers and those who have not received pay increases in several years.
Several panel sources expressed apprehension yesterday that if Congress begins extending the tax credit to more and more of these groups without requiring that they adhere to the guidelines, pressure will mount to turn the plan into a general tax-relief measure, which Carter opposes.
Ullman has asked the committee' staff to draft alternative proposals for using the tax system to encourage workers and companies to comply with the wage-price guidelines, but the recommendations are not due until Congress reconvenes.
Sources said Ullman's main point to Blumenthal yesterday was to urge the administration to come in early with a specific, detailed plan for the tax-credit proposal, rather than merely sending Congress a broad outline and leaving it to the committee to come up with the details.
Insiders said the Ways and Means chairman apparently felt left out on a limb when the administration refused until too late to come up with a compromise to try to head off a proposed cut in capital gains taxes. The capital gains reduction eventually made it through both houses.
On other issues, Ullman told Blumenthal yesterday the committee probably would take up the question of Social Security payroll taxes next summer, but was unlikely to vote any changes that would take effect in 1979 or 1980. A major boost in payroll tayes now is scheduled for 1981.
At the same time, he said that while Congress is not planning a general income tax cut next year, it would move quickly to lower taxes if the economy went into a major recession. The administration currently is contending there is no likelihood of an economic slump.