A big increase in Social Security taxes scheduled for 1981 should be permitted to take effect, instead of being rolled back by Congress, a special national study group said yesterday.
The National Commission on Social Security, set up in 1977 by Congress, recommended that increases in the tax rate and in maximum taxable wage "should go into effect in 1981 as scheduled under present "law" in order to preserve the financial soundness of the Social Security trust funds.
In fact, the commission said in an interim report, to avoid temporary cash-flow problems resulting from inflation and the likely recession, it might be wise to allow the old-age insurance fund to borrow or give it outright some of the funds of the more affluent disability insurance fund. Borrowing from the Medicare fund or the Treasury should also be permitted, the commission said,
The recommendations came as a House Ways and Means subcommittee prepared to resume hearings on Social Security financing and benefit matters.
The subcommittee is likely to feel pressure from some House members to roll back the scheduled 1981 tax increase, although Capitol Hill sources said there appears to be somewhat less public resentment toward the Social Security tax burden than had been anticipated a year or so ago.
This year the Social Security tax on worker and employer is 6.13 percent each on the first $25,900 of annual earnings. The rate is scheduled to rise to 6.65 percent and the maximum taxable wage to $29,700 on Jan. 1, 1981.
The commission, headed by attorney Milton Gwirtzman, said that if Congress kept the rate at 6.13 percent in 1981 and raised the maximum taxable wage somewhat less than scheduled, it would have to find $14 billion from other sources in 1981 to make up the revenue loss to the Social Security system.
All nine members of the commission, including former secretary of health, education and welfare Wilbur J. Cohen, former Social Security chief actuary Robert Myers and business and insurance executives, said that the 1981 increases could be postponed only if alternative financing methods were assured. Two of the nine recommended financing Medicare from sources other than the payroll tax.
It appears that President Carter's forthcoming fiscal 1981 budget will recommend against postponement of the scheduled increases.
Ten years ago, in 1970, the maximum Social Security tax for an employe was $374.40. It will be $1,587.67 this year and $1,975.05 in 1981. Substantially higher benefits, including automatic cost-of-living increases, help account for the rise.