The United Auto Workers and the AFL-CIO said yesterday that Congress should authorize the use of income-tax revenues to help finance Social Security and block the rapid, growth of Social Security payroll taxes.
UAW President Douglas A. Fraser and AFL-CIO spokesman Larry Smedley told a hearing of the Social Security Advisory Council that using general revenues would help reduce the burden of the payroll tax on low-in-come workers and shift part of it to the income tax, with falls more heavily on the well-to-do.
The statements by Fraser and Smedley will add fuel to a House drive to get the Ways and Means Committee to block scheduled 1980 and 1981 payroll tax increases. The House Democratic Caucus is scheduled to take up a resolution in mid-January instructing Wasy and Means to take such action. A major fight over the resolution and the general revenue issue could develop in this Congress.
The controversy over Social Security rates began two years ago when Congress voted substantial payroll tax increases to help fund the system, which was badly out of kilter. A reduction in the growth of future benefits was also voted at that time. A Carter administration proposal to use some general revenues instead of relying solely on the payroll tax was turned down in the 1977 legislation.
The 1977 bill restored Social Security to a reasonably sound financial condition but it required future tax increases beyond those previously contemplated. The tax, which was 6.05 percent each for employer and employe on the first $17,700 of a worker's salary in 1978, has now risen to 6.13 percent each on the first $22,900 this year, and will jump to 6.65 percent each on the first $29,700 in 1981, with further increases later.
Labor groups and many members of the House want to roll back the increases and find some new way to fund added costs. Using some income-tax revenues would be one way -- but those funds are going to be tight in this budget-conscious year.
The Carter administration so far has taken the position that further major financing changes should be postponed until several large-scale studies are completed. For the moment, it favors only some minor pruning of benefits to cut costs a bit -- about $550 million in fiscal 1980, which is a tiny amount in a program exceeding $100 billion.
The U.S. Chamber of Commerce said yesterday that it will oppose any general revenue financing proposal this year.
Fraser said that instead of letting taxes paid by workers rise still further, Social Security taxes should be frozen at the 1980 level.
To make up the income loss to the Social Security trust funds, Fraser said Congress should require employers to pay the payroll tax on their total payroll, not just on the first $22,000 per worker. (The worker, however, would still pay only on earnings up to $22,900 under the UAW proposal.)
In addition, Fraser asserted, general Treasury revenues, obtained from income taxes on all income (including corporate income, capital gains, interest and dividends), should be infused into the system at a rate of about $6 billion in 1981 and further amounts as needed thereafter.
Fraser and Smedley also criticized reported administration plans to seek a tightening of the eligibility conditions and benefits for the Social Security disabiility insurance program. Fraser said President Carter would be wrong to save money by cutting back on those most in need. This would be "unfair and unworthy of a society as affluent as ours."
In other testimony, the AFL-CIO Public Employe Department, representing 2 million federal, state and local government employes, came out flatly against imposing mandatory Social Security coverage on civil service employes at any level of government -- a position also taken by several other public employe groups which fear loss of existing civil service pension rights.
But the American Federation of State, County and Municipal Employes said 30 percent of state and local workers are outside Social Security and must be brought in. About 1 million haven't any pension coverage whatever.
Dolores Delahanty, of the Advisory Committee on the Rights and Respon-sibilities of Women, said a married woman who stays at home should be given Social Security credit for half her husband's earning, so she can build an independent benefit entitlement.